Cetis d.d.

Annual Report 2 0 0 8

Audited annual report

on business operations for

the company Cetis, d.d.,

for the financial year 2008,

and autited consolidated annual report for

the company Cetis, d.d.,

for the financial year 2008

Cetis, d. d. Annual Report 2 0 0 8

2

Table of Contents

4 INTRODUCTION 4 Letter from the General Manager

6 Report of the Cetis, d.d. Supervisory Board

12 Operating Activities of Cetis and Cetis Group in 2008: Highlights

14 Important Events in the Business Year 2008

14 Declaration of Compliance with the Corporate Governance Code for Joint Stock Companies

17 General Information

17 About Cetis

17 Organizational Structure

17 Management and Administrative Bodies

18 Companies of the Group

18 Affiliated Companies

19 History

20 BUSINESS REPORT 21 Business Orientation

21 Mission

21 Vision

21 Values

21 Strategic orientation

22 General Macroeconomic Trends

23 Asset Management

23 Financial Management

24 Investments

26 Shares and Shareholders

29 Sales

29 Commercial Printed Matter

30 Security Printed Matter

30 Sales: Companies of the Group

31 Amba CO., d.o.o.

32 Cetis Zagreb

32 Cetis Tirana

32 Cetis Print


3 33 Research & Development

33 Developments in Graphics

34 Cetis New Technologies

35 Production

37 Purchasing and Logistics

39 Employees

45 Corporate Social Responsibility and Care for the Environment

45 Quality Management

47 Environmental Responsibility

49 Social Responsibility

50 FINANCIAL REPORT FOR CETIS, d.d. 51 Independent Auditor’s Report

52 Statement of Management Responsibility

53 Income Statement

54 Balance Sheet

56 Cash Flow Statement

57 Statement of Changes in Equity

58 Summary of Significant Accounting Policies and Notes to the Financial Statement

67 Income Statement Disclosures

71 Balance Sheet Disclosures

86 Disclosures to Cash Flow Statement

92 CETIS GROUP FINANCIAL REPORT 93 Independent Auditor’s Report

94 Statement of Management Responsibility

95 Consolidated Income Statement

96 Consolidated Balance Sheet

98 Consolidated Cash Flow Statement

100 Consolidated Statement of Changes in Equity

103 Summary of Significant Accounting Policies and Notes to the Financial Statements

114 Income Statement Disclosures

117 Disclosures of Consolidated Balance Sheet Items

131 Disclosures to Cash Flow Statement

Cetis, d. d. Annual Report 2 0 0 8INTRODUCTION

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Letter from the General Manager

Dear business partners, buyers, suppliers, shareholders and employees,

the world around us is changing, and so are we – companies, organisations and systems. The only constant in life is change, and in the past year, it was considerable, not only in our country, but also in the wider economic environment. However, we firmly believe that in these difficult economic times, we will find new opportunities to develop and continue to be a successful actor in existing and emerging markets. We will move forward and not dwell on the problems surrounding us. We will continue to seek new business opportunities.

A global integrator of information

Cetis strives to follow its business vision set out two years ago, i. e., to be a global integrator of information. We still plan to expand to all continents and countries, taking into account commercial needs and our ability to perform. South America, Africa and part of Asia are our target markets. The company will provide its buyers more, and all in one place. We will provide products and services which will help them improve their effectiveness. In this day and age, it is no longer possible to operate without information. All our products carry certain information – for example, bank cards, packaging, lottery tickets, printed forms etc.

Year 2008 was …

In 2008, the company concluded several important contracts; however, from the financial point of view, this was partly evident not earlier than at the beginning of 2009. The economic outcome was therefore negative, at 0,4 million EUR. The difference between the planned and the actual outcome for 2008 is primarily the result of the above-mentioned fact; at the same time, we must not omit the harsher economic times and the subsequent reduction in orders in all our business sectors.

There were setbacks in the realisation of some commercial transactions planned in 2008, but these were then carried out at the beginning of 2009. The company again started producing passports for a large Afri-can country. At the end of the 2008 business year, Cetis acquired two bigger projects for a former Yugoslav country – the certificate of vehicle ownership and certificate of vehicle registration, and labels for internal and external application on vehicles.

In 2008, when planned commercial transactions were at a standstill, we still managed to achieve a great deal elsewhere. Among other important completed projects is the acquisition of the ISO 27001:2005 Certificate for Information Security, which gives our company a competitive advantage. Cetis was chosen to produce the new Slovenian driving licence, and the company strengthened and expanded its distribution network. At the end of 2008, the company started implementing organisational changes aimed at achieving greater operational efficiency and the goals set for 2009. One of these goals is to achieve 41 million EUR in sales in the Cetis Group, and a positive economic outcome for the parent company.

Active co-operation with subsidiaries and affiliates

The year 2008 was turbulent not only for the parent company, but also for our affiliates. The shareholders of the affiliated company SNLS in Gabon adopted a number of measures to improve business operations. The capital increase was successfully concluded and the management started looking for a new partner that would be able to enrich the company’s offer with new lottery games and help strengthen the distribution network.

Cetis, d. d. Annual Report 2 0 0 8 INTRODUCTION

5The company Nacional Sh.a Albania started operating at the beginning of 2008. Due to difficulties encountered at the very beginning, the operating result is lower than planned. The company faced difficulties when establishing a distribution network. These were due to a lack of adequate infrastructure, problems with human resources, and the introduction of new games of chance in the Albanian market. As a result, the company adapted the distribution network and marketing in the middle of 2008.

At first, the Amba company faced some problems, but in 2008 it managed to reduce operating costs. Not only did it maintain market shares in some markets, but also increased them. By pooling procurement functions, Amba managed to reduce operating costs, and also unified sales.

Changes in equity

Compared to 2007, the equity of Cetis did not change significantly. Capital in the structure of liabilities represents 61,3 per cent, which indicates that business operations are still stable. In 2007, capital represented 58,8% of liabilities. The liabilities are nominally lower, by 6,3 million EUR, which represents a 20% reduction compared to the previous year. The capital covers 80,7% of all long-term assets, while in 2007 only 75,8% were covered by capital.

Strategic goals

The structure of income is adapted to added value. Added value is based on cost management aimed at ensuring anticipated profitability. We will develop integral solutions by pooling Cetis’s sales programmes, personalisation, electronic solutions and more. It is very important to develop key human resources and the management to expand successfully into new markets, and it is also important to transfer know-how within the company itself. When achieving strategic goals, our main advantage will be recognition and the realisation of new opportunities in the field of information security.

In 2009, we will do what we do best, but also take new approaches.

A new organisational structure, a better return on investments in our subsidiaries, orientation towards developing and attaining a better quality of products and services, enhancing sales in target markets and increasing the profitability of our companies are vehicles to drive us into a successful future. We shall con-tinue to develop a quality offer and expand the activities of the Group.

30 March 2009 Simona Potočnik, MSc

»Strength is in our thoughts; every change is

preceded by a thought, therefore strength. At

the same time, imagination is everything; it is

a preview of life’s events - events still to come

that we first conceive in our thoughts«.


6

Report of the Cetis, d.d. Supervisory Board on the results of examining the audited Annual Report of the company Cetis, d.d. for 2008 and the audited Consolidated Annual Report of the company Cetis, d.d. for 2008

1. Components of the Annual Report

In compliance with the legislation in force, the Cetis, d.d. Supervisory Board examined the legal aspects of the Annual Report prepared by the Management of Cetis, d.d. for the year 2008.

The Supervisory Board established that the Management had prepared the 2008 Annual Report within legal deadline, as well as that the report contains all obligatory components required by the Companies Act currently in force (Official Gazette of the RS, no. 42/2006, as amended, hereinafter: ZGD-1).

The Annual Report comprises the following components: business report and financial report, the latter comprising a Balance Sheet, Income Statement, Statement of Changes in Equity, Cash Flow Statement, explanatory accounting disclosures and indicators.

The Annual Report was audited by the selected auditor at the 13th General Meeting of the company Cetis, d.d. The auditing company ABC revizija d.o.o., Dunajska cesta 101, Ljubljana, prepared the auditor’s reports for the company Cetis, d.d. and the Cetis Group on 22 April 2009, and the company Cetis, d.d. received both on 23 April 2009.

In compliance with third paragraph of Article 272 of the ZGD-1, the Management of Cetis, d.d. submitted the prepared Annual Report and Consolidated Annual Report and the auditor’s reports to the Supervisory Board on 30 April 2009.

2. The method and scope of examining the managing of the company

The Supervisory Board performed its supervisory role mainly at Supervisory Board meetings. In addition, individual Supervisory Board members also exercised their right, based on first paragraph of Article 282 of the ZGD-1, which enables each Supervisory Board member to examine all bases for the annual report. The Supervisory Board members were regularly informed about all significant events that could, or did, affect the company’s business operations in 2008 at the Supervisory Board meetings, upon a request from Supervisory Board members or initiated by the company Management.

The Supervisory Board in 2008 had the following members:

• Ljubo Peče, Chairman of the SB, shareholder representative,• Goranka Volf, Deputy Chairman of the SB, shareholder representative *, • Franc Ješovnik, shareholder representative,• Dušan Mikuš, MSc, shareholder representative,• Bernard Gregl, employee representative,• Marko Melik, employee representative.

* The Deputy Chairman’s mandate expired on 25 August 2008 and the 13th General Meeting of Cetis, d.d. joint stock company did not vote a new mandate for Goranka Volf. Until 25 August 2008, the Supervisory Board therefore operated with six (6) members, and from that date onwards with five (5) members. The mandate of the employee representatives expired on 26 April 2009, while the mandate of the Chairman and the remaining two shareholder representatives expires on 31 May 2009.

In the financial year 2008, the Supervisory Board convened four meetings to perform its supervisory role, on 27 February, 30 June, 13 November and 19 December.


73. The most important Supervisory Board resolutions

The Supervisory Board constantly monitored and adopted decisions regarding the matters most important to the company. In addition to monitoring and supervising the work of the Management and the company’s business operations, the Supervisory Board also adopted the following important resolutions, given below in chronological order:

• Resolutions adopted at the 53rd meeting of the Cetis, d.d. Supervisory Board, on 27 February 2008- the Management report on the Cetis, d.d. business operations in 2007 was adopted;- the delay in realising the business transaction with Sudan in 2007 was taken into account;- due to possible risks, the Management was advised to search for possibilities to disinvest in the

company Druckman, Hungary;- the Business Plan for the Cetis Group for 2008 was adopted.

• Resolutions adopted at the 54th meeting of the Cetis, d.d. Supervisory Board, on 30 June 2008:- the Supervisory Board took note of the Management report on business operations for the com-

pany Cetis, d.d. and the Cetis Group for the period from 1 January 2008 until 30 April 2008;- the Supervisory Board adopted the audited Annual Report and audited Consolidated Annual Re-

port for the company Cetis, d.d. for the financial year 2007;- the Supervisory Board report on examination of the Cetis, d.d. Annual Report and Consolidated

Annual Report for the financial year 2007 was adopted;- the Supervisory Board confirmed the agenda and the wording of the resolutions for the Cetis, d.d.

regular General Meeting, as follows:

Proposed agenda and proposals for resolutions

for the General Meeting of the company Cetis, d. d., Čopova 24, Celje, to be held on 25 August 2008 at 10.00 at the business premises of the company’s registered office, conference room no. 608.

1. Opening the General Meeting, establishing a quorum and electing the Chairman of the Gen-eral Meeting and two members to count votes

Proposal for a resolution: Quorum of the General Meeting is established. The General Meeting elects Ljubo Peče as Chairman and two members to count votes, Miro Zakrajšek and Bernard Gregl, and establishes that in order to take minutes notary Srečko Gabrilo is present.

2. The General Meeting took note of the Annual Report on the company’s business operations for 2007, the auditor’s report and the Supervisory Board report on the examination of the An-nual Report in writing

Proposal for a resolution: The General Meeting takes note of the Annual Report on the company’s business operations for financial year 2007, the auditor’s report and the Supervisory Board report on the examination of the Annual Report in writing.


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3. Voting on allocation of profit for appropriation and discharge of the management and the Supervisory Board

Proposal for resolutions:3.1. The work of the Management and Supervisory Board of Cetis, d.d. in the financial year 2007 is hereby confirmed and approved, and the Management and Supervisory Board members are discharged.

3.2.Profit for appropriation in the company Cetis, d. d. for 2007 amounts to 872.904,55 EUR and shall remain undistributed.

4. Amendment of the company’s Articles of Association

Proposal for a resolution: a. The Company’s activity shall be harmonised with the Decree on standard classification of

activities (Official Gazette of the RS, no. 69/07, 17/08) SCA 2008 and item 3.3. of the company Articles of Association shall be amended accordingly, so that the codes and stated activities are harmonised with the Standard Classification of Activities 2008. Amendments to the ac-tivity shall enter into force as of the date when adopted at the General Meeting.

b. Paragraph 8.4. is deleted from the Articles of Association; it specifies that: »The Company has statutory reserves amounting to EUR 1.001.502,25 (one million, one thousand five hundred and two, twenty-five) for the following purposes:- zto cover unexpected business risks which caused loss,- for own business shares,- to decrease share capital,- to pay out dividends.Each year until this amount is reached, the company may, in drawing up the annual report, allocate to statutory reserves up to 20 (twenty) per cent of net profit generated in a certain year.«

5. Auditor appointment

Proposal for a resolution: The General Meeting appoints as the certified auditor for the financial year 2008:ABC, družba za revizijo in sorodne storitve d.o.o.Dunajska 101, 1000 Ljubljana.

- Negotiations to conclude contracts on worker’s participation in profit-taking shall begin when dividends are paid out to shareholders again.

• Resolutions adopted at the 55th meeting of the Cetis, d.d. Supervisory Board, on 13 November 2008:- The Supervisory Board took note of the Management report on the business operations of Cetis,

d.d. in writing for the period January - September 2008, as well as of the oral Management report on the business operations of Cetis, d.d. for the period January - October 2008;

- the Supervisory Board discussed the business plan for the Cetis, d.d. company and Group for 2009, and rejected it with the opinion that is not ambitious enough. It also proposed that by the next meeting the Management prepare a new business plan which would take into consideration the current financial situation of the company and the group and would envisage appropriate Manage-ment measures to enable the pursuit of business objectives. It expressed its expectation that the Management would set out concrete measures in the business plans aimed at increasing productiv-ity and income and reducing expenditure, in order to increase the return on capital for the company Cetis, d.d.

• Resolutions adopted at the 56th meeting of the Cetis, d.d. Supervisory Board, on 19 December 2008:- the Business plan for the company Cetis, d.d. and Cetis Group for the year 2009 was adopted;- the audit committee of the Cetis Supervisory Board was established; the following members were

appointed: Dušan Mikuš, MSc, as President of the committee, Ljubo Peče as committee member, and Dejan Jojić as external committee member.

Minutes were drafted for each Supervisory Board meeting and adopted with a resolution.


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4. Management reporting

Extensive reports from the Management in the financial year 2008 enabled the Supervisory Board to ad-equately perform its supervisory role. Management reports were in general prepared per segments opera-tional within Cetis, with a joint and systematic overview of all business effects.

In its reports, and oral explanations when necessary, the Management presented all relevant items that affect the business operations of the joint stock company.

5. Evaluation of business operations

The Supervisory Board of the company Cetis, d.d. analysed movements in certain relevant financial data and indicators expressing the business performance of the company Cetis, d.d., and established that:• net sales revenue was generated in the amount of EUR 25.668.580, which is 9,7% less than the year

before and 29,9% less than planned;• the total profit or loss before taxes is 132,88% lower than achieved in 2007 and 116,4% lower than

planned for 2008;• the net loss amounting to EUR 417.028 contributed to reducing the profit or loss by 143,6% compared

to 2007;• return on capital in Cetis, d.d., calculated as the ratio between total profit or loss in 2008 and the aver-

age balance of capital (excluding the net profit or loss for 2008) for the same year, is -1,28%;• return on capital in Cetis, d.d., calculated as the ratio between net profit or loss in 2008 and the average

balance of capital (excluding the net profit or loss for 2008), for 2008 is -1,39%, which is 4,5 percentage points less than in 2007;

• operating expenditure amounted to EUR 27.866.007, which is 7,1% less than in the same period the year before. Operating costs are structured as follows: 55,6% comprises the costs of goods, material and services, 30,4% labour cost, 12,8% amortisation and depreciation expense and 1,2% other ex-penditure;

• in the Income Statement for 2008 the company Cetis, d.d. disclosed financial revenue amounting to EUR 2.375.753 and financial expenditure amounting to EUR 1.199.721. The surplus of financial revenue over financial expenditure, amounting to EUR 1.176.032, is 26,3% lower than in 2007;

• profit for appropriation in Cetis, d.d. at 31 December 2008 amounted to EUR 455.877;• basic earnings per share in 2008 amounted to EUR -2,09;• the book value of each share at 31 December 2008 was EUR 143,27 (at 31 December 2007 = EUR

154,94),• the number of employees in Cetis, d.d. on 31 December 2008 was 380, which is 12,8 percent less than

at the end of 2007.

The Supervisory Board of Cetis, d.d. analysed movements in certain relevant financial data and indicators expressing business efficiency for the Cetis Group and established that:• net sales revenue was generated in the amount of EUR 35.966.704, which is 9,0% less than the year

before and 23,6% less than planned;• the total profit or loss before taxes is 86,0% lower than in 2007 and 97,9% lower than planned for 2008;• the net profit amounting to EUR 86.298 represents a decrease in profit or loss by 50,0% compared to

2007;• return on capital in Cetis Group, calculated as the ratio between net profit or loss in 2008 and the aver-

age balance of capital (excluding the net profit or loss for 2008), for the same year, is 0,21%;• return on capital in Cetis Group, calculated as the ratio between net profit or loss in 2008 and the

average balance of capital (excluding the net profit or loss for 2008), for 2008 is 0,29%, which is 0,28 percentage point less than in 2007;

• operating expenditure amounted to EUR 38.337.021, which is 6,39% less than in the same period the year before. Operating costs are structured as follows: 60,5% comprises the costs of goods, material and services, 26,4% labour cost, 10,7% amortisation and depreciation expense; and 2,4% other ex-penditure;

• in the Income Statement for 2008, the Cetis Group disclosed financial revenue amounting to EUR 2.425.353 and financial expenditure amounting to EUR 1.195.008. The surplus of financial revenue over financial expenditure, amounting to EUR 1.230.345, is 41,0% lower than in 2007;

• profit for appropriation in the Cetis Group on 31 December 2008 amounted to EUR 269.498;


10 • basic earnings per share in 2008 amounted to EUR 0,38;• the number of employees in Cetis Group on 31 December 2008 was 436, which is 12,6 percent less

than at the end of 2007.

Based on the stated indicators, the Supervisory Board established that in 2008 the company Cetis, d.d., including the Group, operated below planned results, but taking into consideration the unpredictable movements in the market it created a good basis for business operations in 2009 and beyond by increasing its activities.

6. Forming profit for appropriation and a proposal for its allocation The Supervisory Board checked the profit for appropriation as of 31 December 2008. The profit comprises net profit from previous periods amounting to EUR 872.904,55, less the net loss in 2008 amounting to EUR 417.028,34, and therefore amounting to EUR 455.876,21.

The Supervisory Board agreed to the Management proposal according to which the profit for appropriation for the company Cetis, d.d., amounting to EUR 455.876,21 as of 31 December 2008, is retained and carried forward to be used in subsequent periods.

7. Independent auditor’s report

The Supervisory Board took note of the Independent Auditor’s Report and established that an unqualified opinion had been issued.

The Supervisory Board has no comments on the Auditor’s Report. The Supervisory Board established that the Auditor’s Report contains all the contents set out in second paragraph of Article 57 of ZGD-1.

The Supervisory Board notes that the auditor established the financial statements to be a true and fair presentation of the financial position of the company Cetis, Graphic and Documentation Services, d. d., as of 31 December 2008, and its profit or loss and cash flow for the year ended on that date in accordance with International Financial Reporting Standards. The auditor confirmed that the business report is in accordance with the audited financial statements.

Furthermore, the Supervisory Board notes that the auditor established the consolidated financial statements to be a true and fair presentation of the financial position of the Group of companies Cetis, Graphic and Documentation Services, d. d., as of 31 December 2008, and its profit or loss and cash flow for the year ended on that date in accordance with International Financial Reporting Standards. The auditor confirmed that the business report for the Group is in accordance with the audited financial statements.

8. Comments of the Supervisory Board on the Annual Report for 2008

The Supervisory Board has no comments on the Annual Report for 2008 which would represent an obstacle in adopting a decision to approve the Annual Report.


119. Approving the Annual Report for 2008

At the 58th meeting, held on 29 May 2009, the Supervisory Board checked the audited Annual Report for Cetis, d.d. and audited Annual Report for the Cetis Group for 2008 and established that:

- the Annual Report was compiled on time,- the Annual Report was compiled in accordance with ZGD-1, International Financial Reporting Stand-

ards and the company’s Articles of Association,- the Annual Report includes all relevant data important in taking a decision with regard to adopting

the report,- the financial statements and the underlying documents for the financial statements and the Annual

Report were reviewed by a certified auditor, who submitted an unqualified opinion to the company’s business operations.

In 2008 the Supervisory Board monitored and checked the company’s business operations on the basis of oral and written information from the Management, while the final opinion was based on the audited annual reports mentioned above. The Supervisory Board is of opinion that the submitted Annual Report for the company presents a fair and true financial situation of the company, and therefore approves the audited Annual Report for the company Cetis, d.d., as well as for Cetis Group for the year 2008. The Supervisory Board approved the Annual Report for 2008 within an open deadline, i.e. before one month from the date when annual reports for 2008 were submitted to the Supervisory Board expired.

Celje, 29 May 2009 President of the Cetis, d.d. Supervisory BoardLjubo Peče, BSc Law, signed

The present Report was adopted at the 58th meeting of the Cetis, d.d. Supervisory Board held on 29 May 2009.


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The Operating Activities of Cetis and Cetis Group in 2008: Highlights

Operations in EUR thousand

Cetis Group Cetis, d.d.

2007 2008 2007 2008

Net sales 39.520 35.967 28.411 25.669

Sales – domestic market 24.208 22.458 21.625 19.736

Sales – foreign markets 15.312 13.509 6.786 5.933

Gross profit 11.396 10.399 8.423 7.424

Net profit or loss for the period 173 75 957 -417

Investments 4.976 1.421 4.788 1.265

Gross added value per employee 28,4 31,5 27,2 27,4

Number of employees 499 436 436 380

Scope of investments

Cetis Group Cetis, d.d.

2007 2008 2007 2008

In EUR thousand 4.976 1.421 4.788 1.265

Chain index 178,90 28,56 190,60 26,4


13Structure of assets

Skupina Cetis Cetis, d.d.

Asset/year in EUR thousand 2007 2008 2007 2008

Long-term assets 46.303 39.619 40.894 35.495

Short-term assets 15.446 14.864 11.817 11.266

Total assets 61.749 54.483 52.711 46.761

Structure of resources

Skupina Cetis Cetis, d.d.

Source/year in EUR thousand 2007 2008 2007 2008

Capital 30.396 28.495 30.989 28.655

Long-term liabilities 13.731 10.176 9.768 7.104

Short-term liabilities 17.622 15.812 11.954 11.003

Total liabilities 61.749 25.988 52.711 46.761


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Important Events in the Business Year 2008

- Company Cetis-ZG, d.o.o. acquired the ISO 9001:2000 Quality Standard. - Cetis-ZG, d.o.o. received the Croatian Gazelle Award for the fastest-growing company in Croatia.- Cetis acquired the ISO 27001:2005 Certificate for information security.- The company was chosen in a public tender of RS as a provider of new driving licences.- We responded to another tender and were chosen to print tobacco stamps.- The company expanded its distribution network: we are active in Bosnia and Herzegovina, Macedonia

and Serbia, and we are also marketing in the Czech Republic and Slovakia.

Important events after the balance sheet date

- The company re-established its key areas, which are the basis for the new organisational structure as of 1 March 2009.

Statement on Corporate Governance

The company Cetis, d.d. implements a transparent governance and management system, taking into account best practices and the highest business principles. Recommendations from our internal controls and auditors provide a solid foundation for an effective and high-quality decision-making.

The governance and management of Cetis is based on a comprehensive set of positive relations between the Management and the Supervisory Board, the shareholders and other stakeholders, and also on mechanisms of control and supervision. Business operations comply with all legal provisions, the Rules of the Ljubljana Stock Exchange and internal regulations.

Cetis, d.d. is managed by its Management; the Management is supervised by the Supervisory Board. The management of subsidiaries and affiliated companies is performed in accordance with provisions of their Articles of Association.

1. Compliance with the Management code for publicly traded companies

Based on the provisions of the Rules of the Ljubljana Stock Exchange and the legislation in force the com-pany Cetis, d.d. hereby expresses its Statement of compliance with the Management code for publicly traded companies (Official Gazette of RS no. 118/2005 of 17 December 2005, as amended, with effect from 5 February 2007, hereinafter: Code) for the period from 1 January 2008 to the adoption of this Annual Re-port. The Code is available to the public in Slovenian and English language on the web site of the Ljubljana Stock Exchange www.ljse.si. The Company operated in compliance with the provisions of the Code that was in force before the amendments were adopted. In 2008 it also followed the recommendations of the Management code for publicly traded companies with the amendments applicable from 5 February, 2007, with the exceptions listed below. Some recommendations of the Code are not relevant for the Company and cannot be breached and are therefore not explicitly exposed. The obligations of the Company and its bodies respectively will be performed if there is such a case.


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2. Derogations from the Management code for publicly traded companies

1.2.6. in 1.2.7.The Company treats all the shareholders equally and does not specifically encourage them to exercise their rights.

2.3.8.The remuneration, compensation and other benefits of the Management are disclosed to the public in the total amount in accordance with legal provisions.

3.1.5.The Supervisory Board operates without the rules of procedure but in accordance with legal regulations.

3.4.6. in 3.4.7.The insurance of liability for damage of the Supervisory Board members has not been established.

3.6.-3.9.With regard to the size of the Company and its organization, the Supervisory Board did not form any special committees, except for audit committee.

4.3.The Articles of Association do not define the types of operation that require from the Management to obtain the consent of the Supervisory Board.

7.1.4.So far an auditor has not been present at the company’s General Meeting.

8.1.1.According to the regulation the Company has not published half-yearly reports so far.

8.2.The Company’s shareholders are mainly Slovenian legal and natural persons and this is the reasons that publications are in Slovenian. Only annual reports are published in English.

8.6.The Company does not prepare a financial calendar for the forthcoming financial year because currently it is not possible to precisely determine the deadlines of individual publications. The Company promptly informs the shareholders of all relevant events.

8.11.The Company determines risk factors in the annual report.8.15.5.The Company has not adopted a special bylaw that would specify the rules on trading in the Company shares because the Company does not consider

it necessary. In this field the legislation in force is applied.

8.17.1. in 8.17.2.The Company has not published its Articles of Association on the website but they are available in the legal office at the Company’s registered office. The Company posted on the website the name and contact information of a person in charge of investor relations.

The Company shall respect the recommendations of the Code with the derogations described above also in future. If it appears that the Company cannot respect any of the Code provisions, the Management and the Supervisory Board will prepare a justified explanation.

3. The system of internal control and risk management with regard to financial reporting

High-quality financial reporting is of crucial importance for the effective operation of the governance and management system in Cetis, d.d. The Management of the parent company is responsible for risk management, implementing the risk management system and internal control system. Risk management is further detailed in the financial section of this report. In 2008 the Company employed a Controlling Director for the field of controlling and risk management.

4. Information from indents 3, 4, 6 and 9 of the sixth paragraph of Article 70 of the ZGD-1

The rules on the appointment and replacement of the members of the management or supervisory bodies are set out in the company’s Articles of Association, which comply with ZGD-1 and which are available for inspection at the company’s legal office. Amendments to the Articles of Association are adopted with the majority of at least three quarters of the share capital represented at the decision-making process.

The Management of the Company does not have special authorisation to issue or purchase own shares.

Other relevant data with regard to the Company is presented in the sub-chapter Shares and Shareholders of this report.

5. General Meeting of the company Cetis, d.d., and shareholder rights and the exercise of those rights

SThe convening of General Meeting and other matters relevant to its implementation are set out in the legisla-tion and the company’s Articles of Association, which are available at the Company’s registered office.


16 Higher management of subsidiariesIn 2008, the following appointments and changes in the management of subsidiaries occurred: Milan Maksić was appointed General Manager of the new company Cetis Print Serbia, and Roman Žnidarič was appointed General Manager of the company Amba CO d.o.o.

b) Supervisory Board of the company Cetis, d.d. Until 25 August 2008, the Supervisory Board operated with six (6) members, and from that date onwards with five (5) members. The Chairman of the Supervisory Board and two members represent the capital, with a mandate until 31 May 2009. Two members represent the employees; their mandate expired on 26 April 2009. The mandate of the Deputy Chairman of the Supervisory Board expired on 25 August 2008, and at the 13th Session the General Meeting of Cetis, d.d. did not vote for her new mandate. The structure of the Supervisory Board is specified in more detail in the chapter Organisation of the Cetis Group of this Annual Report.The Supervisory Board convenes at least four times a year and acts in the best interests of Cetis, d.d. and its shareholders. It also supervises and advises the Management regarding the best management of the Company and the Group and their future development.

c) Audit Committee of the company Cetis, d.d. In accordance with ZGD-1, on 19 December 2008 the Supervisory Board appointed the Audit Committee of the company Cetis, d.d., as follows: Dušan Mikuš as the Chairman, Ljubo Peče as a member and Dejan Jojić as an independent expert, trained in accounting or auditing.

d) External auditThe Annual Report for 2008 was audited by a new auditor, ABC Revizija d.o.o. from Ljubljana.

Ljubo Peče, BSc Law, signedChairman of the Supervisory Board

Simona Potočnik, MSc, General Manager of Cetis

The Management of the company convenes a Gen-eral Meeting, usually once a year. The General Meet-ing is open to all shareholders or their representatives, who are obliged to confirm their participation at least three days before the session.

The General Meeting is announced within a legal deadline, i.e. at least 30 days before it is held, in the Official Gazette of the Republic of Slovenia and on SEOnet. The company publishes important events in the electronic communication system of the Ljubljana Stock Exchange, SEOnet and on its web page www.cetis.si.At its 13th session on 28 August 2008, 66.6% of the stakeholders were present. The shareholders adopted the decisions of the Management regarding the utili-sation of the profit for appropriation, the discharge of the Management and the Supervisory Board, the ap-pointment of an auditor and the presentation of the Annual Report 2007.

6. Management and supervisory bodies of the Company

a) Management of the company Cetis, d.d.The Management of Cetis, d.d. has one member, Simona Potočnik, MSc; her mandate started on 5 August 2005. The Management is appointed by the Supervisory Board. In accordance with the company’s Articles of Association, after five years the Management can be appointed for another mandate. The Management manages the Company by concluding contracts in the best interests of the Company, independently and on its own responsibility. The Management reports to the Supervisory Board on the developments in the Company and the business system. It also consults the Supervisory Board regarding important business issues and the management of the whole group. The members of the Council and the advisers to the Management are also involved in the decision-making process, thus ensuring high-quality and effective decision-making.

The governance and management of subsidiaries The Management of Cetis, d.d. ensures effective management of the whole group and encourages the use of ethical business principles which comply with the legal framework of all the group’s companies. In this way the reputation of the company is upheld, which is also one of the elements of risk management. The management of subsidiaries is based on internal and external supervision and regular reporting.


17

General information

Cetis, d.d. ID Company name: Cetis, Graphic and Documentation Services, d.d.

Registered office: Čopova 24, 3001 Celje, Slovenia

Company reg. number: 5042208

Tax number: 24635812

VAT number: SI24635812

Share capital: 10.015.022,53 EUREntered in the Companies Register at the District Court of Celje under regis-tration number 063/10147600.Transaction accounts: Nova LB d.d.: SI 56 0223 4001 1655 374

Banka Celje d.d.: SI 56 0600 0002 6390 798

Abanka Vipa d.d.: SI 56 05100-8000027831

Probanka d.d.: SI 56 2510 0970 4894 196

Bank Austria Creditanstalt d.d.: SI 56 2900

0000 3262 161

Telephone number: +386 3 4278 500

Fax: +386 3 4278 817

E-mail: [email protected]

Web site: www.cetis.si

Organizational structure of the Cetis Group

Management and Administrative Bodies

Management: Simona Potočnik, MSc, General Manager

Supervisory Board: Ljubo Peče, Chairman of the SB, shareholder repre-sentativeFranc Ješovnik, shareholder representative

Dušan Mikuš, MSc, shareholder representative

Bernard Gregl, employee representative

Marko Melik, employee representative


18

Companies of the Group

Cetis-ZG,

Company for Trade and Services, d.o.o.,

Industrijska ulica 11,

10431 Sveta Nedelja,

Croatia,

e-mail: [email protected],

web page: www.cetis.hr ,

t: +385 1 333 5000,

f: +385 1 333 5001,

manager: Matej Polutnik.

Cetis Print d.o.o.,

Breza 8,

11030 Beograd,

Serbia,


web page: www.cetisprint.rs,

t/f: +381 11 2511 913,

manager: Milan Maksić.

Cetis-Tirana Sh.p.k., Twin Towers, Tower 1, Blvd. Deshmoret e Kombit, Kati IV, Tirana, Albania, e-mail: [email protected], t: +355 4 280 424, f: +355 4 280 425, manager: Marko Tumpej.

Amba CO.,

Production and Trade, d.o.o., Ljubljana,

Leskoškova 11,

1000 Ljubljana,

Slovenia,


web page: www.amba-tc.si,

t: +386 1 587 4300,

f: +386 1 586 4305,

manager: Roman Žnidarič.

Affiliated companies

Nacional Sh.a, Albania,

Rruga Kavajes, Porta Kry Esore, Misto Mame,

Tirana,

Albania.

Druckman, Budapest,

Jaszu. 33-35,

1135 Budapest,

Hungary.


19

History

The first words written on various surfaces such as stone, bones, tree bark, wood, palm leaves, leather, clay boards, papyrus, waxed wooden and ivory plates and so on, were the first physical preservation of human thoughts, discoveries and events of that time and place, and these words were put down for future generations. All this dates back to the 17th century B. C.

The printed word has a long, 200-year tradition in Celje. The very first print-shop in Celje was opened in 1788. And it was around that time that the foundations of today’s Cetis were laid. Its last predecessor was Tiskarna Družbe sv. Mohorja, and in 1949 this printing plant - Tiskarna Družbe sv. Mohorja - was transformed into the state-owned company Celjska tiskarna. Ten years later, Celjska tiskarna merged with the regional newspaper Celjski tednik under a new name Celjski tisk, but in 1965 Celjska tiskarna again became an independent company.

The company changed its name into Cetis almost a quarter of a century ago, and began realising its set objectives, and the emphasis at that time was on the production of continuous forms for mechanographic data processing. Having merged with Aero in 1971, Cetis increased the production and technological growth of all of its printing techniques, and the production of continuous forms and self-adhesive labels was also accelerated. In 1990, the employees of what was then TOZD (Temeljna organizacija združenega dela - Basic Organization of Associated Labour) Grafika in Aero decided to separate the TOZD from the parent company and in the following year, Grafika became the limited liability company Cetis.

Six years later, the ownership transformation of the company was concluded. Cetis was converted into a joint-stock company and was entered into the register of companies on 13 February 1996. In 2001, the company renewed its entire graphic image, and a modern, market-oriented and technologically advanced company was formed. At AGM in 2003, the shareholders confirmed the renaming of Cetis, Graphic Compay, d.d. as Cetis, Graphic and Documentation Services, d.d., due to the company’s expanded activities and varied product range. In 2007, the company divided thus into four sellling pillars and adapted its business orientation, emphasizing the merger of the ‘black art’ with information technology.

Cetis, d. d. Annual Report 2 0 0 8BUSINESS REPORT

20

BUSINESS REPORT

Cetis, d. d. Annual Report 2 0 0 8 BUSINESS REPORT

21

Business orientation

Mission Cetis provides for safe data management. With printed and electronic media, the company offers comprehensive solutions in corporate communications and security printed matter. Our purpose is to provide services that enable our clients to achieve optimal results and strengthen their position in the market, and that enable Cetis to grow continually. This is why we have been striving to combine graphic services and information technology, and to manage both.

Vision The vision of the company is to be a global integrator of information. We strive to be the best partner to companies and countries worldwide in the fields of identification, security and corporate communications, and a leading partner and consultant when dealing with the rationalization and management of costs in packaging, corporate communication systems, documents and lottery games.

Values • Innovation.• Multidisciplinarity• Teamwork.• Opennesstochallenges.• Professionalism.

Strategic orientation In Cetis, we are well aware of the importance of a modern model of strategic management aimed at increasing competitive advantage. We devote most of our attention to a policy of products and services that is in accordance with the needs and wishes of our clients. Our business strategy is to achieve the leading position in the field of high-quality commercial and security printed matter in higher volumes, which is divided into four selling pillars: packaging, business communication systems, games of chance and documents. It is based on joint investments and on international action. The company adapts the structure of income to added value. Added value is based on cost management aimed at ensuring anticipated profitability. Development is oriented towards personalization and electronic solutions, and towards comprehensive solutions achieved by combining Cetis’ marketing programmes. It is also very important to develop key human resources and the management to successfully expand to new markets, and it is also important to transfer know-how within the company itself.


22

General Macroeconomic Trends

The year 2008 will be remembered as one of the most economically negative and probably crucial years in history. Many analysts around the world believe that this crisis, which affected every economy, is the biggest crisis since the Great Depression in the 1920’s. Some claim that the crisis has ended the trend towards liberal macroeconomic systems. It is said that governments will intervene more in the economy, especially in strengthening control of the banking and financial sectors.

And of course, Slovenia and Cetis, also fell victim to these negative global economic trends. A constant decline in the SBI index caused an overall reduction of its value by 60% in one year. The share value of some major companies listed on the Ljubljana Stock Exchange fell significantly; one of the ‘record holders’ was also a national bank that was the first to be listed on the stock exchange. Compared to the main index, the decline of Cetis stocks was not so abrupt.

Visibly lower export growth, a reduction in industrial production and the processing industry, the lower value of completed projects in the building industry and the lower turnover in retail trade in November and December indicate a significant slowdown in economic activity in the last quarter of 2008. Due to lower demand in the EU and abroad, exports in the last quarter were, on a year-on-year basis, lower by 9,4% (nominally); in the processing industry it was lower by 11% (in real terms), and production in all processing industry sectors shrank. For the first time since 1993, gross national product in the last quarter fell by 0,8% compared to the same quarter in 2007. Real GNP growth in 2008 was 3,5%, which is significantly lower compared to GNP growth in 2007 (6,9 % growth). In our company, the decline in economic activity was mainly evident in the field of commercial programs, such as self-adhesive and other labels, packaging, some types of business communication systems etc.

The modest lending activity of banks stabilised considerably in November and this continued well into December; this meant that it was harder to acquire financial resources in terms of price and adequate insurance. In December, after eleven months of downturn, credit volume growth, on a year-on-year basis, reached the lowest point in two and a half years (18,1%). In 2008, the banks granted about 25% fewer loans to the national non-banking sectors compared to 2007. And due to the harsher economic situation in the international inter-bank money market, the extent of borrowing of national banks abroad was only about one third of that in 2007. Household deposits were very important in providing the liquidity of banks.

The situation in the labour market grew gradually worse in the last quarter of 2008, and in January 2009 the number of unemployed exceeded the numbers in January 2008. In December, the number of persons in employment fell by more than is usual for the period.

In December, year-on-year inflation in Slovenia was 2,1%. Inflation in Slovenia stabilised more quickly than in the euro zone. In the second half of the year, the year-on-year growth of the harmonized index of consumer prices in Slovenia fell from 6,9% in July to 1,8% in December; in the euro zone during the same the same period, the HICP fell from 4% to 1,6%.

Source: Slovenia Economic Mirror, January 2009 and February 2009. IMAD.


23

Asset Management

Financial management

The operating results of the company were lower than those achieved in 2007. However, due to business opportunities and financial circumstances, the company managed to maintain a favourable financing structure, despite the decline in long-term financial resources. The company estimated the financial situ-ation through the break-down and analysis of past, current and hard-to-predict planned cash flows. The company took into consideration the following known principles and rules of financing:- coherence of the extent, structure and trends in assets, as well as liabilities,- consistency of business operations by providing rational financing, reduction of financial risks and opti-

mal solvency, together with the appropriate financing economics, - achieving a positive financial result as a net cash flow attributable to operating activities,- the possibility to increase financial strength by increasing assets.

The company strove to achieve these principles, despite lower total revenue and a negative operating result. The company financed current business operations, to a certain extent, with its own resources and resources acquired through the adjustment of investment policy and the disposal of some investments.

The emphasis of the financial analysis was based on the financial and capital structure, as well as on the latest estimate and provision of creditworthiness of the company. By disposing of assets not relevant to business operations, and by dynamically planning the cash flows, the company managed to provide for the resources and guarantees needed to ensure stable current business operations and crucial investments.

The 2008 business year was very demanding for the company in terms of financing, and it required prompt adjustments to the new circumstances in the domestic and international money and capital market. In the field of financing, the company adopted, due to the circumstances in the market, decisions regarding the registration of financial investments which were based on the European Commission Regulation. Because of changes in the MRS 39 and MSRP 7 Standards, on 1 July 2008 the company categorised all its short-term securities as long-term financial investments. Given the trends in the stock market, this meant that the company achieved a better current business operating result in the second half of the year.

In light of the above circumstances and the well-known situation on the market, the primary goal of the company in 2008 was to ensure appropriate solvency. In doing so, the company still primarily took account of financing economics, while possibly controlling financial risks.

The debt to capital ratio changed in 2008 due to business operations; in the structure of financing resources, this ratio was 61.3 : 38.7, which means that the ratio is still better than in the previous year (in favour of capital), despite the achieved negative operating result. This ratio is the result of already implemented and ongoing measures in the field of financing; in this respect, the company ensured that assets and resources were harmonised in terms of timetable.

At the end of 2008, the long-term assets were fully financed with capital and with foreign long-term resources. With regard to the financing structure, which is balanced, those financial measures were implemented that led to an appropriate financial correction. Above all, the company used those internal measures that improved, in the short term, the level of self-financing.

In 2008, the company was successful in managing receivables resulting from business operations in 2007, taken as a receivables turnover ratio; compared to the previous year, the company has fewer receivables. The company was also more efficient with regard to supplies: these were reduced in the structure, in the absolute figure and also when compared to revenues. However, the fact remains that the result of the financing in 2008 was positive despite the increased interest rates and the significant downturn in stock exchange quotations in capital markets. This result had a positive impact on the achieved operating profit or loss of the company.

The company is well aware that because of the lowered level of self-financing, regular business activities must as soon as possible reach viable business operation levels, so that the re-payment of long-term liabilities is not jeopardized (the company successfully repays all its liabilities from financing). The company will acquire new or longer-term finance resources. Financial risks or individual exposures of the company are detailed in the financial report.


24

Investments

Scope of Investment in 2007-2008 (in EUR thousand)

2007 2008

Intangible fixed assets 237 512

Buildings 204 250

Equipment 4.347 503

Total 4.788 1.265

Compared to the values for 2007, the company reduced investments in property, plant and equipment. In 2008, the company invested only in much needed equipment and renovation of facilities. In 2008, the company invested a significantly higher amount of resources in intangible fixed assets.

In future, the company intends to invest even more in the market as well as in modern technology and know-how. The main purpose is to ensure higher productivity, responsiveness, specialisation and the reliability of business processes and, consequently, lower costs.

Cash flows – investments in 2007-2008 (non-consolidated)

Inflows (offset) in EUR thousand

2007 2008

Property, plant and equipment 312 765

Financial investments 541 1.693

Total 853 2.458


25Outflows (offset) in EUR thousand

2007 2008

Intangible fixed assets 237 512

Property, plant and equipment 4.551 753

Financial investments 1.802

Total 6.590 1.265

In 2008, the company implemented an investment policy to achieve a positive cash flow.

Gross value added in EUR thousand

2007 2008

Gross value added in EUR thousand 12.052 11.350

Chain index 100 86

Gross value added in 2008 was lower compared to the previous year. Because of the rapid changes in the market, the company failed to implement all the necessary adjustments of its business activities or adjust-ments in domestic and foreign markets. It was also not successful in this respect through its subsidiaries and affiliated companies abroad.

In future, the company expects, with regard to its investments, to increase efficiency and returns, while ensuring long-term liquidity. In line with needs and the defined strategy, the company will invest in property, plant and equipment and other long-term assets, and in light of the existing market conditions, it will dispose of all investments not relevant to its business activities.


26

Shares and shareholders

The share capital of Cetis, d.d. is divided into 200,000 registered ordinary shares bearing the CETG mark, which are traded on the Ljubljana Stock Exchange. All shares are freely transferable. The company made no changes to the share capital in 2008. The Company publishes all the required information on the SEO-net portal of the Ljubljana Stock Exchange.

The number of shareholders did not change significantly in 2008. At the end of 2008, there were 1.021 shareholders. Compared to the end of 2007, the number of shareholders decreased by 45. In 2008, due to the reorganisation of the status of an existing shareholder into the Infond balanced mutual fund, one new shareholder appeared among the ten largest shareholders.

Structure of shareholders as of 31 December 2008

Shareholder Number of shares Percentage of share capital in %

Cetis-Graf d.d. 78.493 39,25Balanced mutual fund Infond 27.358 13,68Kovinoplastika d.d. 18.649 9,32Kapitalska družba d.d. 15.609 7,80Slovenska odškodninska družba 14.948 7,47VS Probanka Globalni naložbeni sklad 12.049 6,02Triglav naložbe d.d. 12.043 6,02NFD Holding d.d. 3.500 1,75Merkur 530 0,27Raiffeisen Zentralbank a.g. 459 0,23Other legal and natural persons 16.362 8,19Total 200.000 100,00

The ten largest shareholders own 91,81% of the total shares issued in dematerialised form by the Central Securities Clearing Corporation in Ljubljana. As of 31 December 2008, the company holds 201 of its own shares for the purposes stated in the second indent of Article 240 of the Companies Act (ZGD-1). The com-pany did not acquire any additional own shares in 2008.

The Management Board member owned 100 ordinary shares of the company. None of the securities holders has special control rights. The voting rights of the securities holders are not limited.

At the end of 2008, the share market value was EUR 66,00, which – based on the total number of issued registered shares - was 46,1% of the book value, which at the end of 2008 was EUR 143,28. In 2008, both the book value of the share and its market value decreased.


27

Movements of the market and book values of CETG shares in years 2007 and 2008

Market valueof the share in EUR

(as of 31 December)

Book valueof the share in EUR

(as of 31 December)

Ratio between the two values

2007 93,15 154,94 60,12008 66,00 143,28 46,1

Movement of the SBI20 and CETG values in 2008

0,00

2.000,00

4.000,00

6.000,00

8.000,00

10.000,00

12.000,00

3.1.20

08

3.2.20

08

3.3.20

08

3.4.20

08

3.5.20

08

3.6.20

08

3.7.20

08

3.8.20

08

3.9.20

08

3.10

.200

8

3.11

.200

8

3.12

.200

8

0

20

40

60

80

100

120

The average price of CETG shares on the regulated market of the Ljubljana Stock Exchange did not fluctuate significantly in 2008. In the first six months, the price dropped to about 70 EUR per share. At the end of the year, the price fell below 70 UR per share, i.e. to 66 EUR per share. Compared to the SBI20 index, the market value of the CETG share decreased less dramatically.

Net profit per share in 2007 and 2008 in EUR

2007 2008

Net profit/loss per share 4,79 -2,09

Note: The calculation is on the basis of the weighted average of the number of shares.

Dividend policy

In 2008, the company failed to achieve the planned positive result. In light of the worldwide economic crisis, dividend policy is much harder to predict. If the company achieves the planned positive results in the following years, the management of the company, taking into account all the relevant circumstances, will in individual years propose the allocation of corresponding net profit to dividends.

Value SBI20

Value CET


28


29

Sales The sales activities of Cetis, d.d. are based on four selling pillars: documents, packaging, lottery games and business communication systems with a common denominator - globalisation. The strategies relating to the selling pillars are well planned and divided within the company into security and commercial printed matter.

In the field of documents, we are directed towards developing strategic partnerships by upgrading inte-grated solutions development. We seek possible potentials for public-private partnership with public in-stitutions, and develop comprehensive offers to support small-sized countries. We pay special attention to the development of smart card technologies. In the field of packaging, we strive to modernise production and to include the consumers’ wishes regarding the development cycle of products and services and the upgrading of packaging into special ecological and other packaging. In the field of lottery games, which is our third selling pillar, we strive to develop a global business model for games of chance and new offers (services) in connection with other pillars. Cetis offers this model to the market with a view to promoting sales activities and advertising. The future of business communication systems lies in the systematic devel-opment of direct marketing solutions: the concentration of new services development connected to the pillar in the parent company, and the transfer of tested models to new print centres and the standardisa-tion of repeatable documents.

Sales of commercial printed matter In the field of commercial printed matter, which includes packaging and business communication systems, the company reached only 83% of the planned goals. In the business year 2008, the company had 12.110 thousand EUR in revenues. We planned to reach 14.660 thousand EUR, and the biggest deviations from the plan were in the fields of flexible packaging, photo bags, direct mail and forms.

In the field of flexible packaging (wrapping polypropylene labels, wrapping paper labels, thermo-shrinkable sleeves), we maintained our market share in the domestic market. However, in the foreign market, despite more aggressive sales activities, we managed to acquire only one-off contracts. We are working intensively on foreign markets, and we expect that this will increase the income in the next year.

Strategically, the photo bags are in decline; the market is very divided and the processing is very specific. In the business year 2008, our commercial department kept in close contact with potential buyers across Europe and realised 62% of planned sales, i.e. 620 thousand EUR.

In the field of direct mail, 75% of the selling plan was achieved, i.e. 1,9 million EUR. In the field of commercial printed matter, we retained our contractual buyers. At the same time, we acquired a new buyer in the field of receipt printing; this new buyer is among our biggest clients. The business transactions in this field went as planned. The greatest deviations were in the field of one-off orders for direct mail. In the last quarter, the number of these orders fell significantly compared to the previous year.

Forms represent the biggest selling group in commercial printed matter in terms of value. In the business year 2008, sales in the domestic market increased; however, we achieved only 82% of the planned goals. The commercial printed matter segment strengthened its sales activities in SE Europe, prepared a new pricing strategy, ensured responsiveness and quality, and in 2009, further growth is planned.

In the field of self-adhesive and paper labels, the company operated successfully; compared to the previous year, sales rose by 5%. The company maintained its market share in the domestic market, and strengthened sales activities in target markets in Austria, Germany and in SE Europe.

In 2008, we also focused on the preparation of a new strategy regarding new target markets; a new strategy regarding conditions of sale for individual regions; we hired new staff in the field of area sales management for foreign markets, the expansion of the distribution network directly through the activities of new sales agents and adjustment of internal processes to market expectations.

Due to all these activities, we expect good results in the field of commercial printed matter, despite the economic crisis. In 2009, our mail goal-orientations are a systematic approach, enhanced activities in for-eign markets, more inquiries, competitive offers and meeting our customers’ needs.


30

Sales of security printed matterSales of security printed matter include three major product groups: identity documents, cards and lottery games. The company sells security printed matter to twelve European and African countries, although we sell most of our security printed matter in Slovenia.

In 2008, sales of security printed matter were equal to those in 2007, i.e. 47% of all Cetis sales. We managed to exceed our goals in the field of security forms, security labels and games of chance. We were also very successful in the field of personalised bank cards: we exceeded our sales plan, above all due to a successful continuation of the EMV chip technology implementation and the exchange of cards for one of Slovene’s largest banks.

In 2008, the company produced fewer biometric travel documents due to a decline in the number of applications by citizens of the Republic of Slovenia. We continued to issue EU tachograph cards – we are the system integrator of the European and Slovene systems – and we increased sales of modernised health insurance cards. In a public tender, the company was chosen to print polling cards. Cetis was also chosen to produce and personalise new driving licences on plastic cards for Slovenian citizens. The project started at the beginning of 2009.

In 2008, we continued marketing activities to strengthen the Cetisecurity trade mark in foreign markets and to strengthen our position as a global company for the printing of protected printed matter and system integration. By approaching globally, we continued to fulfil the contract for printing biometric travel documents in Africa, and we were also successful in a public tender for automobile labels and registration documents in one of the former Yugoslav countries. Both projects will be concluded in 2009. The company was present at the international smart cards fair Cartes 2008 in Paris, where we successfully presented our business activities.

The marketing strategy for security printed matter is directed towards a global approach in the field of providing system integration and the production of public travel documentation. In this way, in the light of our pro-active strategy, the company will continue to market its products and services in African and South American countries, where we are present independently, together with our foreign subsidiaries or through local commercial representatives.

Sales by companies of the GroupCetis group provides comprehensive solutions in the field of printed media combined with other media. It offers a wide range of security, variable and commercial printed matter. Aside from these, the company offers services such as personalisation, documentation services and alike.The parent company of the group is Cetis, grafične in dokumentacijske storitve, d.d., registered in Celje. The group includes subsidiaries of the parent company. These are Cetis-ZG d.o.o., poduzeče za trgovinu i usluge; Amba CO., d.o.o., Ljubljana; Cetis, Tirana and Cetis Print d.o.o. Beograd – its majority owner is Cetis-ZG, d.o.o.In the company’s operations and consolidated accounts, the financial statements of these companies are included. The company is the sole owner of the company in Tirana. However, this company does not present financial statements. It acts only as a sales representative.

Net sales revenues in the Group in EUR thousand, 2007 and 2008

2007 2008

Cetis - ZG, d.o.o. 6.892 5.800

Amba CO., d.o.o. Ljubljana 5.261 5.460

Cetis Print d.o.o. 97

Total 12.153 11.357


31

Amba CO., d.o.o. For Amba, 2008 was one of the most dynamic business years in its history. In this year, the company man-aged to further strengthen its position as the largest producer of flexible packaging in Slovenia. At the beginning of 2008, the company acquired new management, and numerous changes in the organisational structure and business operations of the company were later introduced. In this way its owner started to realise the set goals. Volatile conditions in the flexible packaging market compelled the employees to be more active. The streamlining of operations and optimisation of business processes were crucial for success in the market.

Optimisation of purchasing and significantly lower costs of materialsDue to its small size, Amba CO., d.o.o. was very exposed in the field of purchasing. Therefore, to achieve syn-ergy effects and merge business functions with its majority owner, it successfully transferred purchasing to the parent company. This had positive business effects which were evident in the second half of 2008. The know-how of the parent company’s employees and a more favourable negotiating position led to tangible progress in managing the costs of material. 2008 was quite difficult in the field of raw materials for produc-tion; most materials are oil derivates. At the beginning of the last quarter, the movement of prices was un-favourable; however, the fall in prices in the world market had a positive effect for the company. Together with development, purchasing played a crucial role in price monitoring and choosing new suppliers. Thus the company successfully lowered the costs of materials.

Despite fewer employees, sales increased and business operations were soundIn 2008, we faced a significant fluctuation in personnel; at the beginning of the year, there were 42 employ-ees and at the end, there were 33 employees. Labour costs were therefore lower by 20 per cent.

However, despite the lower number of employees, the company managed to continue the planned work. Sales increased compared to the previous year. The increase was 3,7%; the company increased the production of foil by 1%. The company’s biggest market share was in Slovenia, with 51%. Amba managed to maintain its market share and to strengthen the confidence of its clients. The company was also very successful in Austria, where it faced lower competitiveness and problems with liquidity in other markets.

In services, Amba analysed costs and carried out an optimisation, which resulted in a lower costs ratio in revenues of approximately 1 per cent. This was achieved despite the fact that some costs for outsourcing of certain functions were higher.

The biggest problem relating to business optimisation was ensuring liquidity. The situation was even more stringent at the end of the year due to the global financial crisis. This meant sources were more difficult to find and interest rates were higher. Because the company was in debt and because it did not want to increase borrowing, it strove to find internal reserves; above all, the company lowered the costs of inven-tory financing. The company’s inventory was duly lowered by over 50 tons. This was achieved by better production and purchasing planning and by seeking more flexible suppliers.

Growth in 20092009 will probably be crucial. The company will continue on its course. It will probably have to move its production facilities which are currently in a very cost-ineffective location. It will have to invest in the mod-ernisation of production capacities and in finding new markets. The company has big plans for the future. It will further optimise operating costs and seek new business opportunities; the emphasis will be on products with a higher added value. Through its subsidiary Cetis Zagreb, southern markets are emerging, and in the demanding Austrian market, new opportunities are arising. The company will also strengthen sales activities in the demanding German market. In the do-mestic market, the company expects sales to grow, whereby it will strive to maintain good relations with customers and maintain their confidence and also find new business opportunities.

The management of Amba is well aware that it will be hard to achieve sales growth, above all because of good competition and price pressure. This is why the company will continue to actively monitor operating costs. Together with its partners, the company will try to find the right way to achieve the set goals.

The management of Amba CO., d.o.o. will do whatever is necessary to maintain the position as the leading manufacturer of flexible packaging in Slovenia and to successfully develop and fulfil the expectations of its owners, partners and employees.


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Cetis Zagreb 2008 was the most profitable yearFor Cetis Zagreb, 2008 was the most profitable in its history. This is the result of strategic directions and market connections in the past. Over a period of eighteen years, the company has built excellent connections and rela-tions with suppliers, buyers and other important institutions. With high productivity and low costs, the company is the most competitive in the field of form printing (invoices) and direct mail. On a market where quality, price and good service are the decisive factors, Cetis-Zg has no problems concluding business contracts. However, it is not successful in markets where other factors are crucial. Very often, this is because the owner of the company is of Slovenian origin. Therefore, the company has been looking for new opportunities in the free market, where it is believed good business opportunities could be found. Working for the government was unattainable in the past. Croatia is preparing to join the EU, the treasury is lowering costs and costs in state-owned companies are being closely monitored; therefore, this market is also opening.

Year of rewards – the Gazelle Award of central Croatia, the First Croatian Kuna AwardIn 2008, the company again joined the most successful companies in central Croatia, i.e. companies with annual growth exceeding 30 per cent. The company received the First Croatian Kuna award, awarded to one per cent of leading companies among the most profitable and productive companies in Croatia.One of the activities connected to the better fulfilment of customers’ needs was the introduction of the ISO 9001:2000 Quality Standard which the company acquired in 2008. The company also appointed a new director of the profit centre for direct mail. The new director focuses on the market, communication with staff and the introduction of new products.

Ambitious plans for the futureWe are facing a decline in economic growth. Everywhere we go, we hear of the crisis, reduced sales, and lay-offs. Cetis-ZG plans to achieve growth in 2009. It believes that the less successful companies will leave the market and the good, successful companies will have more work. The company has already concluded new contracts. The company has been growing continually since 1995, and has been achieving results, and this is a good sign for the future. In 2008, Cetis-Zg signed a contract regarding invoice production for a major mobile communications provider. The company started this business in the beginning of March 2009. Thus Cetis-Zg is becoming the biggest pro-vider of direct mail in Croatia. The company has its own real estate and equipment, and employs excellent staff. In 2008, Cetis Zagreb made other strategic connections that will bear fruit in 2009 and further into the future.

Cetis Tirana In 2008, Cetis Tirana provided Cetis with 251.746 EUR worth of orders, which is 70% more than in 2007. The com-pany managed to reverse the negative trend of falling turnover fall of previous years and is now recording growth. In 2008, Cetis Tirana acquired new customers and increased the volume of business.The company also faced problems regarding price competitiveness and delivery dates; however, these were suc-cessfully solved to everyone’s satisfaction. The Albanian market is quite specific, and the people are pragmatic and flexible. And in such a market, only those who quickly adjust to the needs and wishes of clients can be successful.

The company, bearing in mind the harsh economic situation in the world and also in Albania, remains very con-servative when making plans for 2009; the goal is to achieve half a million EUR turnover. However, this goal will be hard to achieve. The already difficult situation in the market is even harsher due to the illiquidity of large companies and the population, and this is connected to their way of life. Emigrants are returning to their native countries, and those who stay employed abroad are not sending as much money to their families in Albania as hitherto. And all this is reflected in everyday life. And all attempts to cooperate are difficult. However, there is still a sure way to proceed and maintain the good business operations of the company: to offer quality solutions for our customers’ needs.

Cetis Print Regardless of problems in the previous years, the company achieved more than 97.000 EUR net sales. Ser-bia, too, is facing the consequences of the economic crisis, and this is reflected in the operations of the company. All the regular and potential users of products and services are victims of the recession and, consequently, they are delaying their orders, searching for most favourable suppliers and are delaying new projects. There were additional problems due to the negative exchange rate differences between the Euro and the Serbian Dinar. Cetis Print managed to partially solve this problem with exchange clauses. Cetis Print, which is still establishing its place in the Serbian market, must offer better conditions compared to existing suppliers, such as payment periods and a favourable price, and this is currently the biggest prob-lem when trying to acquire new business. Cetis Print is a small company, and in 2009 it plans to expand, with the support of the parent company. It will hire more quality staff and expand its range of services. In 2009, the company plans to triple turnover compared to the previous year. With its presence in the Serbian market the company has created the impression that it is a business establishment with great potential, and this potential needs to be exploited. Plans will be affected by falls in the national currency and delayed payments by customers, but the company will do everything in its power to overcome these problems.


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Research and Development

Cetis, as a technologically advanced company, lays great emphasis on investment in research and development. The company divides this area into graphic technologies and information technologies. In the last few years, the printing company became a global information integrator, and in its products (chip cards, biometric passports etc.) it successfully combines graphic and information technologies.

Graphics developmentIn 2008, R&D Graphic technologies followed the development guidelines in four basic fields of application:

Documents In the field of documents, the development department actively worked together with the sales department when preparing for public tenders and producing samples for Slovenian and foreign public tenders. In the field of cards, the development department tested and introduced new materials for production (polystyrene, PET-G polyethylene glycol), and standardised constructions and materials for polycarbonate cards (PC). The department produced new protective elements based primarily on visual controls which are the result of its own production of laminate plates. It also tested new materials for existing and new products (PC, PVC materials, Neobond print media, OVD protected dyes).

Lottery games Development activities were directed towards improvements in the field of scratch-cards. In this field, the development department cooperated with the sales department to prepare the technical part of the offer for new buyers, which presented Cetis with new demands. The department also prepared the basics for the video surveillance of games of chance, which will be realised in 2009. The scratch-card technology was transferred to prepaid cards. Buyers are requesting printed coatings, and this opens up good possibilities for the production of these products.

In 2009, Cetis must optimise processes in the field of lottery games. The Company is also planning to introduce

the video surveillance of production and thereby establish better reliability in the process and the end product. It is still investing in the development of new products in this field.

Packaging In the field of packaging, the Company pays special attention to the production of more sophisticated self-adhesive labels (double-layer labels, security labels) and to optimising business and production processes in the field of packaging. Cetis is working on a development project in the field of in-mould labels (IMP technology). The basis of the IML technology is a tool in which, prior to ink jetting, the operator inserts a label made from the same material as the packaging.

Business commu-nication systems In the second half of 2008, the development team was reinforced. Its work is directed towards the

development of new PIN mailers and the standardisation of technology processes.

Young researchers from the economy Program

In 2008, the company applied for the tender ‘Young researchers from the economy – Generation 2008’. This program is partly co-financed by the European Social Fund. The company acquired funds for the research work of a young researcher. The co-financing, which lasts four and a half years, covers most of the costs of the research work, material costs, travel costs and amortisation.


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Plans for the future In the field of packaging, Cetis will strive to develop ‘smart’ packaging and materials. In the field of documents, Cetis will continue to compete for public tenders and develop protective elements that are visible without any special devices. These protective elements will, above all, be manufactured in the lamination phase with laminate plates developed by Cetis, and where there are great possibilities of making new protective elements.

Cetis New TechnologiesThe CeNT Research and Development Division is active in the field of research and development of innova-tive solutions in the field of information technology, in line with the vision of the company.

In 2008, CeNT concluded or began the following important projects

In the last months of 2008, the information services team, apart from extensive regular work, managed the procedures and documents needed to acquire the certificate of conformity with the ISO 27001:2005 Stand-ard, the most important internationally recognised document for the information security field. However, the harmonisation of Cetis’s procedures with this standard did not begin in 2008. The very first steps were taken in 2004, when the first Cetis information security policy was adopted.

In 2008, the harmonisation of procedures in the field of information security with the legal requirements took place; at the same time, emphasis was placed on the improvement of internal services efficiency. Therefore, comprehensively modernised, in terms of safety, the firewall, and this helped reduce the operating costs of information services within the company; it also established a service centre, the ‘ME ServiceDesk’, where all requests in the field of IT user support within the company are monitored. In just a few months, over 1000 requests were processed. This means that every user request for assistance is registered and appropriately recorded, and this allows for immediate problem solving.

Cetis also established the following: control programs for information systems, a security segmentation of the computer network – WLAN, Secure FTP transfer of data (in line with the Data protection act), regular information and education for users, information support for marketing activities when entering foreign markets.

CeNT worked with the Slovenian government on upgrading the following services in the field of compre-hensive services for security printed matter:

• transfertoelectronicexchangeofdatawhenorderingSlovenebiometricpassports,• transfertoelectronicexchangeofdatawhenorderingSloveneidentitycards,• personalisationofsecondgenerationhealthinsurancecards,• CeNTsuccessfullyconcludedthedigitalisationofdocumentsforDURS(RSTaxAdministration).

In the field of supporting the sale of commercial printed matter (for large commercial systems, lottery companies, financial institutions and others), CeNT:

• upgradedthepurchasingcardandimplementedthe‘Connect:Direct’transferofdataforacommercialsystem,

• starteddigitalisingdocumentsforseveralcommercialcompanies;• successfullyconcludedapilotprojectofbettingslipdigitalisation,• startedcreatinganewprogramfortheproductionoflotterytickets,• prepareddocumentswiththerelevantdataforelectronicarchivingforaninsurancecompany.

CeNT underwent a quality evaluation by the following competent institutions: the issuer of credit and payment cards, lottery organisations, central banks, health organisations and authorised auditing firms.


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Production

In 2008, the main problems in production were disproportionate capacity utilisation, reduction of inven-tory, lay-offs, and measures to increase production and reduce the use of materials. In the first quarter, we successfully concluded the first part of the passport production project for a large African country. This project continues in 2009 due to setbacks on the part of the client, and as a result, in 2008 the company had too many semi-products in stock.

By the end of the first half-year, all our banks started using chip payment cards (EMV), and this put personalisation production to the test, as around one million cards had to be personalised in two months. In July, the ‘perso center’ started using the new system of data transfer and identity card personalisation. In November, it started personalising new health insurance cards.

The company invested in new software and production department continued to prepare and produce printing forms. This new working procedure unified processes and automated procedures, and significantly reducing preparation time for printing forms. And with greater efficiency, fewer workers are needed for this task. In 2009, production will be automated and procedures standardised, i.e. from the receipt of the order to the production start-up and then the confirmation of the printing form preparation.

The centralization of dye inventory management produced results above all regarding the reduction in dye and lacquer inventory by 40 per cent. By increasing control and optimising logistics, the current stock of all materials in production was reduced by 31 per cent.

In the second half of 2008, the company did not renew contracts for temporary employment due to reduced production. The number of employees was therefore reduced by 12 per cent.

In 2008, the production department managed to reduce raw material usage by 14 index points compared to the previous year. However, the company failed to attain the goal set for 2008, i.e. a 2% reduction in raw material use according to work orders. This goal will be attained in 2009 with process optimisation.

With a view to improving work discipline and regulating the working environment, in the second half of 2008, the company began regulation, monitoring and evaluating the order and cleanliness of individual divisions. The positive effects are already visible: the divisions are better regulated, the employees are more aware of their working environment and are showing a better approach to work.

Major production projects in 2009:• tosuccessfullyconcludethepassportprojectforalargeAfricancountry,• toreorganisethebusinesscommunicationsystemspillar,• tooptimizeanddeveloppackagingproduction,• toconcludethecentralizationofmanagementandpreparationofdyesinproduction,• torenewthesystemofremunerationandtointroducemoreeffectiveandmotivatingremuneration,

taking into account the effects (productivity, material usage), • in linewiththesetstrategyofprocessorganizationinthecompany,whichisbasedonfourselling

pillars, the aim is to introduce the principles of lean production. This would result in fluent production and constant productivity improvement, a determination of improvement possibilities and definition of activities for improvement and promotion of continuous improvement, above all among produc-tion workers.


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37

Purchasing and Logistics

The purchasing division strives to satisfy the needs of the production process and all other users with the aid of adequately priced high-quality material, goods and services. It is responsible for concluding purchas-ing contracts with all suppliers. This enables the company to implement the basic operation process in a quality and cost-effective manner.

2008 was also a challenge for the purchasing division

Orders and receipts

Year 2007 2008

Total number of orders in Cetis 5.003 3.774

Total number of receipts in Cetis 19.043 12.432

Purchasing value in EUR 11.599.800 10.417.097

Conclusions: purchasing value decreased slightly in 2008. In terms of quantity, Cetis faced a lower number of orders and receipts, which was due to the outsourcing of maintenance works in 2008. In 2008, Cetis took over purchasing for Amba. Despite the above-mentioned facts, the main characteristic of purchasing in 2008 was the fragmentation of orders.

Movement of raw material prices and the search for alternative suppliersAt the beginning of 2008, suppliers announced a material price increase, and the main characteristic of purchasing is still price negotiation. Cetis succeeded in pushing the announced price increases into the second half of the year. And where this was not possible, Cetis changed supplier. Most of the changes were in PVC materials, self-copy papers, packaging and dyes.

Cetis carried out a public tender for the procurement of self-adhesive materials, but the outcomes were not favourable, as the process offered were not different from the existing ones. Therefore, the company has been searching for alternative material sources and new suppliers with lower prices from more distant countries (Asia, Russia, Middle East, South America). By the beginning of 2009, the company had managed to acquire one new adequate supplier of PVC materials for the production of cards.

Monitoring of material inventory and disposal of dead inventory

The company paid special attention to the monitoring of material inventory movement. It managed to use and dispose of some of the dead inventory, it closed the warehouse in Bukovžlak, and this in turn reduced logistics costs. Material is now kept in the warehouse at the company’s headquarters. Purchasing was limited only to materials for already concluded contracts, and the company managed the inventory more intensively.

Relations with suppliers and complaints

The company carried out supplier evaluation, as it does every year. Consequently, a new classification of suppliers was made: A – reliable, B – acceptable, and C – conditional.


38 Number of suppliers by individual groups in the last two years

A B C

2007 23 76 1

2008 24 48 4

Conclusions: the company evaluated all suppliers and subcontractors, except for services and maintenance providers. The ratio in the structure remains the same throughout the year. In 2008, there were a few more conditional suppliers (classification C) due to a greater number of complaints, and some suppliers offered higher prices and were therefore classified as classification C suppliers. Only the top 20 suppliers are in-formed of the results of the evaluation.

In the previous year the company made more complaints than in 2007, i.e. 78, and this shows that the com-pany is stricter when it comes to quality and the volume of production scrap. This can be seen as positive. The company put more pressure on suppliers to deal with complaints in due time. And it was successful: 98% of all the complaints were solved. The company also dealt with a few major long-running complaints, which required a lot of effort and consultation.

Storage transport service

The main emphasis was on cost reduction. Compared to 2007, transport costs were reduced by 10,2 per cent. Costs by individual transport types:

Transport by individual fields in EUR

2007 2008

Domestic market 167.534,00 170.586,00

Abroad 211.031,00 159.623,00

Raw materials 68.261,00 75.669,00

Postal services 28.809,00 21.359,00

Total 475.635,00 427.237,00

Conclusions: until September, the year 2008 was marked by continuous growth in petroleum products prices. This caused an 8% increase in the prices of contracting carriers. After September, the company managed to reduce prices by 12 per cent, in line with the fall in oil prices and in light of the general fall in economic growth. The number of exceptional transhipments in the domestic market also fell, while at the same time we increased the number of raw material shipments. There were more shipments to Croatia, and therefore the company strengthened cooperation with a contracting carrier who turned out to be very competitive. In the field of products and services for the health care industry, the volume of incoming transport also increased. Total costs of transport amounted to 427.237 EUR. Costs of raw material transport were 75.669 EUR, i.e. 17,7%.


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Employees

To make the work of the Human Resources Management Department easier and more professional, the company defined personnel processes in the field of recruitment, employment, job coaching, training and termination of employment contracts. The education and training of personnel is in accordance with the ISO Standard.

The Human Resources Management Department redefined rules regarding alcohol consumption in the workplace and smoking, in order to harmonise with requirements regarding safety and health at work. The company also updated sick leave records. At the same time, the unification of the work hour record system and salary calculation was carried out to optimise the work process.

Number of employees per organisational unit (OU) for 2007 and 2008, as of 31 December

OU2007 2008

IND 0708Number of employees % Number of

employees %

Management 9 2,37 10 2,63 111,11

Sales of commercial printed matter

25 6,58 26 6,84 104,00

Sales of security printed matter 16 4,21 14 3,68 87,50

Purchasing and Logistics 41 10,79 38 10,00 92,68Research and Development of new technologies

21 5,53 18 4,74 85,71

Business integrations and human resources management

11 2,89 10 2,63 90,91

Finance and Economics 11 2,89 12 3,16 109,09Research and Development of graphic technologies

7 1,84 10 2,63 142,86

Production 295 77,63 242 63,68 82,03

Total 436 114,74 380 100,00 87,16


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Number of employees in 2007 and 2008

Število zaposlenih

Plan for 2008 441

New employments by 31. 12. 2008 31

Situation on 31. 12. 2007 436

Terminations by 31. 12. 2008 87

Situation on 31. 12. 2008 380

Fluctuation rate 18,63

Decrease by 31. 12. 2008 -56

Deviation from the plan as of 31. 12. 2008 -61

Conclusions: in 2008, the company continued to reduce the number of employees through soft layoffs: the termination of temporary employment contracts; redundant workers were registered at the Employment Service of Slovenia, and remain registered until they qualify for retirement. For 2008, the company planned, according to the production plan, to have 441 employees. However, at the end of the year, this number was much lower, due to changes in the production plan.

Educational structure of employees in Cetis

Level of education2007 2008

Number of employees % Number of

employees %

II. Primary school 97 22,25 83 21,84

III. Qualified workers 8 1,83 7 1,84

IV. Qualified workers 137 31,42 115 30,26

V. Secondary education 119 27,29 98 25,79

VI. Higher education 27 6,19 26 6,84

VII. University degree 42 9,63 45 11,84

VIII. Master’s degree 6 1,38 6 1,58

Total 436 100 380 100

Conclusions: the number of employees with university degrees increased due to the recruitment of expert staff in the fields of graphic development and sales. On the other hand, the company did not extend tem-porary employment contracts, and this resulted above all in a reduced number of qualified workers.


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Trends in the number of employees in Cetis Group in 2007 and 2008

2007 2008

Cetis Group 499 436

Cetis 436 380

Cetis-ZG 22 22

Amba 41 33

Cetis-Print 1

Conclusions: the number of employees in the group fell in the last few years, above all due to the reduction of the number of employees in the parent company.

Educational structure of employees in the Cetis Group

Level of education2007 2008

Number of workers % Number of

workers %

I. 6 1,37

II. Primary school 103 21 84 19,27

III. Qualified workers 7 1,43 8 1,83

IV. Qualified workers 149 30,41 125 28,67

V. Secondary education 143 29,18 125 28,67

VI. Higher education 30 6,14 28 6,42

VII. University degree 52 10,61 52 11,93

VIII. Master’s degree 6 1,22 8 1,83

Total 490 100 436 100

Conclusions: within the Cetis Group, the number of employees with low educational levels decreased. This is above all due to trends in the parent company: temporary employment contracts were not extended.

Labour costs and costs of salaries in EUR, in %

2007 2008

Average annual gross salary in Cetis 1.134,37 1.233,93

Average annual gross salary in Slovenia 1.285,57 1.391,14

Deviations from the national average in % -12 -11

Average annual gross salary in the industry in Slovenia 1.119,15 1.211,65

Deviations from the average in the industry in % 1,34 1,81

Labour costs in the revenues structure in % 29,18 31,73

With regard to salaries, the company exceeds the average in the industry. However, due to the educational levels of employees, the average salary is lower than the national average.


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Costs of education and training, in EUR

Cetis is well aware of the importance of knowledge, therefore the company supports every wish and need of employees to continues their education and improve skills relevant to their field of work and related to Cetis’s goals. The company realises that one can never be too good. If a worker is to be successful, he or she will need to expand their existing knowledge and constantly improve it.

2007 2008 IND 07/08

Seminars 180.416,15 73.315,23 40,64

Computer science 27.335,58 7.519,50 27,51

Foreign languages 3.466,73 404,35 11,66

Fairs 46.719,00 26.581,58 56,90

Evening school 10.444,72 11.600,68 111,07

Scholarships 21.839,21 14.571,99 66,72

Total 290.221,39 133.993,33 46,17

Conclusions: in 2008, employees continued with target education and training for those lacking skills and competences that are actually needed in the relevant field of work. Above all, these include expert semi-nars, computing and visits to fairs and conferences where novelties in the industry are presented. Com-pared to the previous year, the company allocated more funds to evening classes: it financially supported retraining of four production workers to work in the printing segment.

Statistical data on employees for the past two years

2007 2008

Number of employees 436 380

Share of women 40,60% 42,10%

Share of men 59,40% 57,90%

Average age of females 40,75 years 41,91 years

Average age of males 40,82 years 42,15 years

Average term of employment of female employees 20,58 years 21,92 years

Average term of employment of male employees 20,13 years 21,49 years

Share of permanently employed 84,60% 87,90%

Share of temporarily employed 15,40% 12,10%

Fluctuation rate 13,66% 18,63%

Share of women in management 44,73% 43,59%

New hiring 86 31

Terminations of employment 69 87

Conclusions: the share of women did not change significantly in the company or in the management. In the last few years, the age structure and period of employment naturally increased. This means that, on average, workers stay in the company and therefore the age structure and period of employment increase. The fluctuation rate was higher, however, by 5 per cent, above all due to terminations of temporary em-ployment and departures of some staff.


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Overview of sick leave, in %

MonthSickness benefits chargeable

to the companyeReimbursed sickness

benefitsTotal

January 5,57 2,22 7,79

February 3,61 2,02 5,63

March 5,02 2,06 7,08

April 5,43 2,11 7,54

May 4,04 2,16 6,20

June 3,40 1,67 5,07

July 2,85 1,38 4,23

August 3,16 1,42 4,58

September 4,71 1,29 6,00

October 4,56 2,89 7,45

November 3,80 3,31 7,11

December 3,20 3,37 6,57

Average 4,11 2,16 6,27

Conclusions: in 2008, the percentages of sickness leave decreased on average by 0,13 percentage points. Partly, sickness leave up to 30 days reduced, whereas absence due to longer periods of sickness leave rose by almost one per cent. The company regularly monitors sick leave, and has special interviews with those who are on sick leave for longer periods. For a certain number of employees, a proposal was made to the Pension and Disability Insurance Institute of the Republic of Slovenia to establish the possibility of retirement on the basis of disability.

Safety and health at work

In 2008, all regular health and safety at work activities were carried out in compliance with the Occupational Health and Safety Act, in particular:

- theoretical training of employees regarding safety at work and fire safety (approx. 400 participating employees, excluding management),

- preventive medical examinations for employees (200 employees),- periodical inspections and testing of working equipment (the company acquired operating licences

for 60 machines),- inspections and testing of fire fighting equipment (fire extinguishers, hydrants).

In order to permanently, and in the long-run, improve the health of employees and their safety at work, the following is important: regular monitoring of health status of the employees, timely diagnosis of oc-cupational diseases by means of preventive medical examinations, and the gradual introduction of target health examinations for certain groups of posts. The company also actively co-operates with external part-ners in the field of safety at work when selecting, purchasing and introducing new equipment and new technological procedures in the company.


44 Accidents in 2008

In 2008, fifteen workers were injured: four were injured on their way to work, and eleven were injured at work.

Accidents at work and on the way to work

Injuries 2007 2008

On the way to work 3 4

At work 13 11

Total 16 15

Plans for 2009

In line with the company’s vision – to become a global information integrator – the company will strive to further educate and train employees. Only the good qualifications and skills of every individual can bring success.

In November 2008, the management harmonised and determined the following corporate competences that will be implemented in 2009 in order to develop human resources: system thinking, leadership, vision, promoting changes, mentorship, partnerships and integration, emotional intelligence, decision-making, innovation, team work, control, accepting responsibility, performance management, project management, expert knowledge, risk management. For every individual, and based on an evaluation of competences, we will prepare an analysis of certain competences and also an improvement plan, a development plan and an education and training plan. The company will apply the competences model to all employees and the result will be a number of activities, such as:

1. new definitions of posts - definitions will specify the required competences for individual posts, which is important when hiring and coaching new employees.

2. new methods regarding annual interviews; the worker and his/her superior will determine what com-petences are lacking and prepare a development and training plan.

3. determination of the human resources development policy (promotions, training, assignments to new posts, development etc.).

In 2009, the company will strive to maintain the best staff. In this difficult period when the economic crisis has spared no one, it is very important to use all the energy and commitment of our employees - this is crucial for the development and performance of the company.


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Corporate Social Responsibility and Care for the Environment

Quality managementThe safety and quality of products and services are the fundamental aims of Cetis’ business operations. This has been proven by monitoring carried out by an authorised independent institution. The company verifies and tests the compliance and reliability of most of its products in the in-house laboratory. The criteria are taken from international standards and are often even stricter, with the aim of ensuring product reliability and user-friendliness.

Cetis strives to establish a working environment that is pleasant for, and socially responsible towards its employees, as well as the wider community. It is for this reason that it identifies threats and their possible effects on working conditions. The Company adopts appropriate measures and system improvements to limit such threats.

Cetis’s products and services, which embody a lot of know-how and state-of-the-art technology, demand an extraordinary emphasis on quality. For this reason, Cetis takes due account of, and uses all the techno-logical possibilities to attain the highest quality in all aspects of products and services. The main goal is constantly to improve throughout the business and production processes. With the help of external and internal examinations, the Company determines, at an early stage, any possible deviations or non-compli-ance of every function or process, and thereby it reveals potential for improvement.

Cetis takes the following quality standards into consideration:

• certifiedISO9001:2000QualityManagementSystem,• certifiedISO14001:2004EnvironmentalManagementSystem,• OHSAS18001Occupationalsafetyandhealthsystem,• Visa/Mastercardcertifiedsystemforensuringphysicalandlogicalsafety,• CQM–(CardQualityManagement)Mastercardstandardensuringthequalityofbankcards,• certifiedsystemofinformationsecuritypursuanttoISO27001:2005,• FSCC(FacilitySecurityClearanceCertificate),asecuritycertificateofRSoftheGovernmentOfficefor

the Protection of Classified Information, in accordance with EU security policy.


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47Environmental responsibilityA responsible, healthy attitude towards the natural environment is one of the conditions for a healthy working environment. The Company is well aware of this and it therefore observes the strict environmental guidelines defined in its environmental policy. Cetis is not a heavy polluter of the environment. Neverthe-less, it has been working actively to minimise the effects of its business activities on the natural environ-ment – from raising environmental awareness and education of employees, to considering the environ-mental aspect when acquiring new technologies.

Implementation of environmental goals and programmes in 2008• Reconstructionofwarehousesforhazardoussubstancesandwastewithoptimalstorageconditions.• In2008,thecompanymanagedtoachieveenvironmentalgoalsregardingthereductionofhazardous waste. Compared to 2006 (a 36,3 % reduction), it managed to reduce the volume of hazardous waste by 45,8%.• In2008,theCompanyrecordedaslightincreaseinthevolumeofmunicipalwaste.

Environmental plans for 2009• acquisitionofanenvironmentalpermitforplantsthatcauseemissionsintowater,• reductionofthevolumeofmunicipalwasteby10%,• reductionofthevolumeofhazardouswasteby5%.

Reducing the volume of waste by 30% compared to 2003 remains a long-term goal of Cetis (currently the Company has achieved a 20-percent reduction in total waste). A related goal is to raise the environmental awareness of employees.

Environmental investments in recent years

Environmental investments in recent years Investments in EUR

Introduction of CTP technology 400.000

Introduction of flexo CTP technology 117.892

Construction of a warehouse for hazardous waste 330.000

Total 847.892

Volume of municipal waste

Year 2007 2008

Municipal waste in tons 68,2 88,0

Compared to 2007, the volume of municipal waste rose by almost 2 per cent. In the future, the company will strive to reduce the volume of municipal waste.


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Volumes of hazardous waste in kg

Dangerous waste 2007 2008 differ. in %

Cloth 10.980 9.684 -12

Packaging of dangerous substances 990 940 -5

Dyes 8.989 5.280 -41

Adhesives 2.000 1.790 -11

Toners 284 191 -33

Solvents 943 510 -46

Fixers 1.898 130 -93

Developers 4.272 3.590 -16

Total 30.356 22.115 -27

Compared to 2007, the volume of hazardous waste was reduced by 8.241 kg, i.e. by 27%. The main un-derlying reason for this reduction was reduced production. The greatest reduction in hazardous waste in recent years has been due to the introduction of CTP technology (replacing old reproduction procedures; currently, only 10% are still in use).

Packaging

Cetis generates waste packaging which is not considered municipal waste and is also an insignificant share of waste packaging from direct import. In 2008, the Company generated 99 tonnes of waste paper packag-ing nationwide. The Company’s waste does not burden the environment, as it is later recycled.

Air emissions

The advanced technological equipment and the Company’s dedication to using non-hazardous process materials result in minimum air emissions. Heating is based on natural gas, which is considered an environ-mentally-friendly form of heating.

Year 2007 2008

Natural gas consumption in cm3 181.306 211.731

Electricity

Year 2007 2008

Consumption of electricity in kwh 7.286.970 6.776.730


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Emissions into water

By investing in BAT technology, the Company reduced the concentration of silver in waste water. Also, the measurements of competent institutions show that the Company’s wastewater is within the legally pre-scribed limits for emissions into the public sewerage system.

Year 2007 2008

Consumption of wated in m3 12.666 15.782

When obsolete technology was replaced by modern CTP, the effects of the BAT technology in the prepress department were, in accordance with expectations, obvious also in lower water consumption (use of water has been excluded from the offset plate developing procedure).

Preventive and corrective measures

In 2007 and 2008, the Company did not implement any significant preventive or corrective measures. In most cases, the reason was inconsistent separation of waste and inaccessibility of fire extinguishers.

Environmental communication

Pursuant to the Rules on Environmental Management, the company keeps internal and external records on environmental communication. Periodically, and in the annual report, its employees and business partners are informed of the company’s environmental activities and of the implementation of major projects or investments.

The established channels of communication, such as notice boards, electronic mail, newsletters and meet-ings, are used to regularly inform employees of Cetis environmental activities. Employees are expected to provide concrete proposals for improvements, because those working on individual programmes have the most relevant information. Employees are also constantly trained in the field of environmental protection and safety at work, with the purpose of improving organisational culture in terms of higher environmental awareness. Each individual is obliged to implement the Company’s environment protection policy and to act in accordance with its provisions.

Social responsibilityIn the last few years, the company strove to adjust operating costs to conditions in the market. In accord-ance with this policy, the company adjusted funds allocated to socially useful activities; these funds were considerably reduced. Cetis is still involved in various socially useful programmes and initiatives, yet to a much lesser extent compared to previous years. In 2008, Cetis allocated 0,12 % of its revenues to these activities.

Cetis continues to sponsor sports teams. For several years, the Company has been a sponsor of the Pivovarna Laško Handball Club, the Kladivar Athletics Club, Celje Women’s Handball and other sport associations and clubs. Other donations in 2008 were mainly made to individuals in distress, schools and individual sports activities.

Cetis supports the physical activity of its employees; within, the Company organises sport associations and supports them financially every year. In the light of the well-being of its employees and to raise awareness regarding the importance of health for the quality of life, Cetis introduced a new event three years ago – Health Day.


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FINANCIAL REPORT OF CETIS, d.d. joint stock company


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Independent Auditor’s Report


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Statement of Management responsibility

The Management Board is responsible for preparing financial statements so that they give a true and fair view of the state of affairs at the end of the financial year, and of profit or loss for the period.

The Management Board hereby confirms that suitable accounting policies have been applied consistently and that the accounting estimates are reasonable and prudent. The Management Board also confirms that the financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have been prepared on a going concern basis.

The Management Board recognizes its responsibility for keeping proper accounting records, the adoption of appropriate measures for safeguarding the Company’s assets, and prevention and detection of fraud and other irregularities.

30 March 2009 Simona Potočnik, MSc, General Manager


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Income Statement (IFRS)

In EUR thousand

Notes Achieved in 2008 Achieved in 2007

1. REVENUE 2 25.669 28.411

2. Cost of goods sold 3 -1.986 -1.345

3. Production costs 3 -16.204 -18.643

4. Costs of goods sold and production costs -18.190 -19.988

A. GROSS PROFIT 7.479 8.423

5. Other operating income 4 1.054 950

6. Sales and distribution expenses 3 -3.696 -3.552

7. Administrative expenses 3 -6.195 -6.095

8. Other operating expense 3 -203 -151

= Other income, expenses and costs (5+6+7+8) -8.985 -8.848

B. OPERATING PROFIT OR LOSS EXCLUDING FINANCE COSTS -1.561 -425

9. Finance income 5 2.376 2.397

10. Finance costs 5 -1.200 -802

C. NET FINANCE COSTS 1.176 1.595

D. PROFIT OR LOSS BEFORE TAXATION -385 1.170

12. Income tax expense 6 -32 -213

E. PROFIT/LOSS FOR THE FINANCIAL YEAR -417 957

Basic and diluted earnings (loss) per share (in EUR) 24 -2,09 4,79


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Balance Sheet at 31 December 2008

In EUR thousand

Notes 31.12.2008 31.12.2007

ASSETS

Property, plant and equipment 8 16.692 20.024

Intangible assets 9 1.620 1.375

Investment property 10 203

Investments in group companies 11 3.615 3.616

Investments in affiliated undertakings 12 8 72

Available-for-sale investments 13 12.282 13.016

Loans 14 334 1.550

Long-term trade receivables 15 878

Deferred tax assets 16 741 363

Total non-current assets 35.495 40.894

Available-for-sale assets 17 2.381

Inventories 18 2.853 3.308

Current investments at fair value 19 2.156

Short-term loans 20 897 418

Trade and other receivables 21 4.179 5.434

Cash and cash equivalents 22 956 501

Total current assets 11.266 11.817

TOTAL ASSETS 46.761 52.711


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In EUR thousand

Notes 31.12.2008 31.12.2007

Equity

Issued capital 10.015 10.015

Share premium account 17.859 17.859

Reserves (legal and statutory) 1.927 1.901

Retained earnings 456 899

Own shares held -26 -26

Fair value reserve -1.576 341

Total equity 23 28.655 30.989

Borrowings 25 6.064 8.445

Non-current operating liabilities based on prepayments 26 3 3

Provisions 27 1.010 1.188

Deferred tax liabilities 16 26 132

Total non-current liabilities 7.104 9.768

Borrowings 25 5.730 3.960

Trade and other payables 28 5.273 7.994

Total current liabilities 11.003 11.954

Total liabilities 18.106 21.722

TOTAL EQUITY AND LIABILITIES 46.761 52.711


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Cash Flow Statement (IFRS)

In EUR thousandAchieved in 2008 Achieved in 2007

CASH FLOW FROM OPERATING ACTIVITIES Profit/loss for the financial year -417 957Adjustments for: 2.640 3.249Depreciation and amortisation of property, plant and equipment 3.163 3.254Depreciation and amortisation of intangible assets 267 320(Reversal of ) impairment losses -120 -147Negative translation differences 10 4Finance income -1.585 -541Finance costs 1.190 798Gain on disposal of property, plant and equipment -173 -53Revenue from a decrease in long-term provisions -112 -386OPERATING PROFIT BEFORE CHANGES IN NET OPERATING ASSETS AND PROVISIONS 2.223 4.206

Change in trade and other receivables -12 -1.099Change in inventories 563 291Change in trade and other payables -3.000 1.648Change in provisions and employee benefits -66 -27CASH GENERATED BY OPERATIONS -2.515 813Interest paid -583 -533 NET CASH FLOW FROM OPERATING ACTIVITIES -875 4.486

CASH FLOW FROM INVESTING ACTIVITIES Proceeds from disposal of property, plant and equipment 765 312Proceeds from disposal of investments 1.693 541Interest received 210 69Dividends received 538 254Purchase of property, plant and equipment -753 -4.551Purchase of other investments -1.802Purchase of intangible assets -512 -237NET CASH FLOW FROM INVESTING ACTIVITIES 1.941 -5.414 CASH FLOW FROM FINANCING ACTIVITIES Movements in equity -20Borrowings 6.791 6.787Repayment of borrowings -7.402 -6.067Dividends paid -1NET CASH FLOW FROM FINANCING ACTIVITIES -611 699 Net increase in cash and cash equivalents 455 -229Cash and cash equivalents at beginning of period 501 730CASH AND CASH EQUIVALENTS AT END OF PERIOD 956 501


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Statement of Changes in Equity (IFRS)

In EUR thousand

Issued capital

Capital reserves

Legal and statutory reserves

Own shares

Profit retained

Fair value reserve

Total equity

Balance 1 January 2007 10.015 17.859 1.710 -26 153 690 30.401

Profit 2007 957 957Allocation for statutory reserves

191 -191

Payment of bonuses -20 -20

Decrease in fair value -349 -349

Balance 31 December 2007 10.015 17.859 1.901 -26 899 341 30.989

Profit 2008

Loss 2008 -417 -417

Allocation to reserves 26 -26 Allocation for statutory reserves

Payment of bonuses

Decrease in fair value -1.917 -1.917

Balance 31 December 2008 10.015 17.859 1.927 -26 456 -1.576 28.655

The Management of Cetis, d.d. hereby approves the financial statements and notes thereto for the financial year ended on 31 December 2008.


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Summary of significant accounting policies and notes to the financial statements

1. Company profile

Cetis, Graphic and Documentation Services, d.d. is a Company with its registered office at Čopova 24, Celje, Slovenia. The Company was entered as a joint stock company in the Register of Companies with the District Court of Celje on 13 February 1996 under entry No 95/00923, and on 25 November 2003 under entry No 1/01476/0. The share capital of the Company at 31 December 2008 amounts to EUR 28.655 thousand, and is divided into 200.000 ordinary, no-par value registered shares issued as dematerialised securities at the Central Securities Clearing Corporation (KDD) in Ljubljana. The shares (designated as CETG) are traded on the free market of the Ljubljana Stock Exchange.

Nature of operations and relevant activities The Company’s core business is the provision of comprehensive solutions in the field of communications through printed and other types of media. The corporate vision envisions Cetis as the leading company in Slovenia, with appropriate developmental, investing and marketing activities, and the best qualified staff, looking ahead to increase its market share also outside Slovenia. The Company offers a programme of diversified printed matter, such as security, variable and commercial printed matter; graphic design including accessory services, such as the personalisation of documents, the implementation of micro chips or magnetic tapes, archiving, identity management, consultancy, project management and other services.

Fact sheet of the parent companyCetis, d.d. is a parent company of the Cetis group, for which consolidated financial statements are prepared.

2. Basis of preparation of financial statements

The 2008 financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and the interpretations of the IFRS Interpretations Committee (IFRSIC), as adopted by the European Union.

The financial statements were approved by the Management Board in March 2009.

Basis for measurementThe 2008 financial statements have been prepared on a historical cost basis, except for the following items that are measured at fair value:- financial instruments at fair value through profit or loss,- financial instruments at fair value through capital

or financial assets held for sale.The methods applied to measure fair value are described below.

Functional and presentation method The financial statements are presented in euros (EUR), i.e. the functional currency of the Cetis, d.d. company. All accounting information presented in euros is rounded off to the nearest thousand.

Use of estimates and judgements The preparation of financial statements in accordance with International Financial Reporting Standards (IFRS) requires the Management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions need to be reviewed on a regular basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Information about significant risk assessments and critical judgements which the Management prepared during the process of applying account-ing policies, and which have the most significant impact on the amounts presented in the financial statements, are described in the following notes: - Point 16 – utilisation of tax losses.- Points 26 and 27 – provisions and contingencies.- Point 29 – valuation of financial instruments.

3. Relevant accounting principles applied

The accounting policies stated below were consist-ently applied by the Company to all the periods presented in the enclosed financial statements.


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a) Foreign currencies

Transactions denominated in a foreign currency are translated into a suitable functional currency of the company using the rate of exchange effective on the date of transaction.

Assets and liabilities expressed in a foreign currency are translated on the date of the event and at the end of the accounting period using the reference exchange rate (ECB) of the Bank of Slovenia in EUR.

Monetary assets and liabilities stated in a foreign currency on the balance sheet date are translated into functional currency at the applicable rate of exchange. The foreign exchange gains or losses are the differences between the amortised cost in the functional currency at the beginning of the period, adjusted by the amount of effective interest and the payments effected during the period, as well as the amortised cost expressed in a foreign currency and translated at the exchange rate at the end of the period. Non-monetary assets and liabilities stated in a foreign currency and measured at fair value are translated into the functional currency at the exchange rate effective on the date on which the fair value was set. Foreign exchange gains and losses are recognised in the Income Statement.

b) Financial instruments

Non-derivative financial instrumentsNon-derivative financial instruments include in-vestments in equity and debt securities, trade and other receivables, cash and cash equivalents, bor-rowings and loans, and trade and other liabilities.Initially, non-derivative instruments are recognised at fair value increased by costs that are directly related to the business transaction. Subsequent to initial recognition, non-derivative financial instruments are measured as explained below.

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of cash management are included as a component of cash and cash equivalents in the Cash Flow Statement.

Accounting of finance income and finance costs is discussed in Point k) – Finance income and finance costs.

Financial assets available for sale Investments of the company in equity securities and certain debt securities are classified as availa-ble-for-sale financial assets. Subsequent to initial recognition, these investments are measured at fair value, and the changes in fair value with the excep-tion of impairment losses are recognised directly in

equity. When an investment is derecognised, the related gain or loss is transferred to profit or loss. When accounting for the regular purchase or sale of a financial asset, the asset is recognised or derec-ognised, respectively, taking into account the date of payment.

Investments at fair value through profit or lossAn instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the company is able to manage such investments and make purchase and sale decisions based on their fair value. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and a change in fair value is recognised in profit or loss.

OtherOther non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.

Share capitalOrdinary sharesOrdinary shares constitute an integral part of the share capital.

Repurchase of own shares When shares recognised as equity are repurchased, the amount of the consideration paid, including directly attributable costs and excluding potential tax effects, is recognised as a change in equity. The shares bought back are classified as own shares and presented as a deduction from total equity. Upon sale of own shares, the amount received is recognised as an increase in equity, whereas the surplus or loss in transaction is recognised in equity.

c) Property, plant and equipment

Items of property, plant and equipment are carried at cost, less any accumulated depreciation expense and accumulated impairment losses. At the date of transition to IFRS, the items of property, plant and equipment were stated at their historical cost as estimated on 1 January 2005.

Historical cost includes costs that are directly attributable to the acquisition of assets. The cost of an item of property, plant or equipment that is a result of own production comprises material costs, direct labour costs and other costs that can be directly attributed to bringing the asset to a working condition for its intended use, as well as the costs of dismantling and removal from the location where


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it was used and restoring such location. Purchased software that is integral to the functionality of the related equipment is capitalised as a part of that equipment. The costs of borrowing related to the purchase and production of the related assets are disclosed in the income statement when incurred.

Parts of an item of property, plant and equipment with different useful lives are accounted for as sep-arate items of property, plant and equipment.

Gains or losses from the disposal of property, plant and equipment are determined as the difference between the income generated from the disposal of asset and its book value, and are disclosed in the income statement among “other operating in-come” or “other operating expenses”.

Subsequent costs in connection with property, plant and equipmentThe cost of replacing a part of an item of property, plant and equipment is recognised in the book value of the asset if it is probable that future economic benefits linked to such a part will flow to the company, and if its historical cost can be reliably measured. All other costs, such as day-to-day servicing, are recognised in the income statement as expenses when incurred.

Depreciation expenseThe calculation of depreciation expense is based on a straight-line method, taking into account the useful life for each asset. Depreciation charges on these assets are made individually. Land and assets in the process of acquisition are not depreciated.

Depreciation rates are based on estimated useful life of assets and amount to:

In years min In years max


Buildings 7 40

Equipment – graphic activities 3 20

Laboratory equipment 3 10

Vehicles 5 8

Telephone sets, telegraphic switchboard 3 5

Furniture 5 6

Typewriters, computer equipment 3 8

Computer equipment for fire safety 3 3

Measuring and control devices 4 6

Useful life is determined and examined in accordance with the Rules on accounting and finance. The item Buildings includes parts such as hydraulic bridge-over plate, with a 14,2% depreciation rate or useful life of 7 years.

Depreciation methods, useful life and the carrying value are reviewed at the reporting date in accordance with the Rules on accounting and finance.

d) Intangible assets

Research and developmentExpenditure on research activities aiming to obtain new scientific and professional knowledge and understanding is recognised in the income statement as expenditure when incurred.

Development activities involve a plan or design for production of new or essentially improved products and processes. A development expense is recognised: if it can be reliably measured; if the product or process is technically and operationally feasible; if there is a potential for future economic benefits; if the Company has adequate resources for the completion of development; and if it intends to use or sell such assets. The recognised amount of expenditure comprises the cost of materials, direct labour costs and other costs which can be directly attributed to qualifying the asset for its intended use. The cost of borrowing related to developing the asset and other costs are recognised in the income statement when incurred.

Recognised development expenditure is carried at historical cost, less value adjustment for depreciation expense and accumulated impairment losses.


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Other intangible assetsOther intangible assets acquired by the Company with finite useful lives are disclosed at historical cost reduced by accumulated depreciation expenses and the current impairment losses.

Subsequent expenditureSubsequent expenditure related to intangible fixed assets is capitalised only when it increases the future economic benefits arising from the specific asset to which it relates. All other expenditure is recognised in the income statement as expenses when incurred.

DepreciationDepreciation of assets is calculated on the basis of a straight-line method, taking into account the useful life of an asset. The assets acquired in the current year are subject to depreciation when they are available for use. The estimated useful lives for the current and comparative periods are shown below.

Depreciation rates are based on the useful life of assets:

In years min

In years max

Intangible assets 3 10

e) Investment property

An investment property is a property owned in order to generate rent, or to increase the value of a long-term investment, or both. Investment property therefore creates cash flow that is highly independent of other assets owned by the company. An investment property is defined:

• landownedtoincreasethevalueofalong-terminvestment, not for sale in the near future as part of regular business operations;

• landforwhichthecompanyhasnotdeterminedits future use;

• a building owned or in financial leasewhich isleased out on the basis of a single or multiple op-erational lease;

• vacantbuildingownedonthebasisofasingleormultiple operational lease

and• in caseswhen,with regard to assetdetermina-

tion, a part of the property is investment prop-erty and another part a tangible fixed asset, but they cannot be sold separately, the whole asset is determined as an investment property if the part which is a tangible fixed asset is insignifi-cant; otherwise, the whole asset is recognised as a tangible fixed asset. Whether the proportion is significant or not is determined by the employee competent for the segment.

Measuring recognised value

The company measures investment property based on a historical cost model.The historical cost of a purchased investment property comprises its purchase price and all directly attributable costs. Directly attributable costs include, for example, attributable fees for legal services, tax on property transfer, and other costs of a transaction.

The historical cost of a property constructed within the company comprises its cost until the date when the construction or development was completed. On that date, the property becomes investment property.

Disposal

Investment property ceases to be recognised upon disposal, or when it is permanently withdrawn from use and no future economic benefits can be expected from its disposal.

Profit or loss from discontinuation or the disposal of investment property has to be established as the difference between net return upon disposal and the book value of assets, and is recognised in the income statement.

Depreciation

Investment property is depreciated at the same rate as investments used by the company. The manner of determining the useful life is the same as determining the useful life for property, plant and equipment.

f) Subsidiaries and affiliates

Long-term financial investments in equity in subsidiaries and affiliates are valued according to historical cost. Participation in profit is recognised in financial statements when the Company has obtained the right to have it paid out.

g) Inventories

Inventories are valued at historical cost or net realisable value, whichever is lower. The value of inventories is based on the First-In-First-Out method (FIFO) and includes purchase value, costs of production and translation and other costs generated with the storage of inventories to the current location and their current condition. For finished products and work in progress, production costs also include an adequate share of indirect production costs, taking into account the normal use of production assets.


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Net realisable price is the estimated sales price to be achieved in ordinary business operations, re-duced by the estimated cost of completion and the estimated costs of sale.

h) Impairment of assets

Financial assets On the reporting date, the Company assesses the value of a financial asset in order to judge whether there are any objective signs of asset impairment. A financial asset is considered to be impaired if objective evidence indicates that one or more events reduced the estimated future cash flows arising from that asset.

An impairment loss related to a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of a financial asset held for sale is calculated at its current fair value.

Significant financial assets are assessed for impairment individually. The remaining financial assets are assessed collectively in groups that share similar risks exposure characteristics.

All impairment losses are recognised in the income statement. Any current loss in respect of a financial asset which was not recognised directly in equity shall be transferred to profit or loss.

An impairment loss is reversed if the reversal can be impartially linked to an event occurring after the impairment was recognized. For financial assets carried at amortised cost, and available-for-sale financial assets which are debt instruments, the reversal of impairment loss is recognised in profit or loss. For available-for-sale financial assets that are equity securities, impairment losses can not be reversed directly in profit and loss.

Non-financial assetsAt each reporting date, the Company assesses the residual book value of non-financial assets, exclud-ing inventories and deferred tax liabilities, in order to establish whether there is any objective indica-tion of asset impairment. If such an indication ex-ists, then the asset’s recoverable amount is estimat-ed. For intangible assets that have indefinite useful lives and are not yet available for use, impairment is estimated at each reporting date.

The recoverable amount of an asset or a cash-generating unit is its value in use or fair value, whichever is higher, reduced by costs of sale. When determining the value of an asset in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate which reflects current market assessments of the time value of money and the risks specific to the asset. To check for impairment, assets are combined into the smallest possible groups that generate cash inflows from permanent use, which are to a large extent independent of other assets or groups of assets (‘cash-generating units’).

Impairment of an asset or a cash-generating unit is recognised when its book value exceeds its recoverable amount. Impairment is recognised in profit or loss. Loss that is recognised with a cash-generating unit due to impairment is distributed to assets in a unit (groups of units) in proportion to the book values of individual assets in a unit.

In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s book value does not exceed the book value that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised for the asset in previous years.

i) Employee benefits

Other long-term employee benefitsThe net liability of the Company generated with regard to long-term employee benefits is the sum of future benefits that the employees have gained in return for their work carried out in the current and previous periods. Thus calculated, the sum of benefits is discounted in order to determine its current value, which is then reduced by the fair value of all related assets. The discount rate is the AA-rated bond yield at the reporting date, for which the due date is approximately the same as the due date of the Company’s liabilities. The calculation is based on the projected unit credit method. Potential actuarial profit or loss is recognised in the income statement in the period of its occurrence.

Short-term employee benefitsLiabilities for short-term employee benefits are measured on an undiscounted basis and are recognised as expenses when the employee’s work related to a short-tem return is provided.


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The liability is disclosed as an amount for which payment in the form of a premium is expected, which is due in twelve months after the period of work performance is completed, or according to the programme of profit distribution if the company has a current legal or constructive obligation to make such payments because of the employee’s performance of work in the past and this liability can be reliably measured.

j) Provisions

Provisions are recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of factors which create economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax interest rate that reflects current market assessments of the time value of money and, if required, the risks specific to the liability.

Warranties for products and servicesProvisions for warranties for products and services are recognised when the underlying products or services are sold. The provision is based on historical data related to warranty and a judgement of all potential outcomes against their associated probabilities.

k) Revenues

Revenues from products soldRevenue from the sale of products is measured at the fair value of the consideration received or the related receivable, reduced by net of returns and price reductions, trade discounts and volume re-bates. Revenue is recognised when the significant risks and rewards of ownership have been trans-ferred to the buyer, when recovery of the consid-eration and the associated costs is probable, and possible return of goods can be estimated reliably, and when there is no further management involve-ment with the sold goods, and the revenue can be reliably measured.

Transfer of risks and benefits varies depending on the individual terms and conditions of the contract of sale. For sales of goods, transfer usually occurs when the product is received at the customer’s warehouse; however, for some international ship-ments, transfer occurs upon loading the goods onto the relevant carrier.

Revenue from services suppliedRevenue from services rendered is recognised in

the income statement in proportion to the stage of completion of the business transaction at the reporting date. The stage of completion is assessed by verifying the work performed.

Rental incomeRental income is recognised in income on a straight-line basis over the term of the lease.

l) Finance income and finance costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on disposal of available-for-sale financial assets, changes in the fair value of financial assets held for trading through profit or loss, which are recognised in the income statement. Interest income is recognised in the income statement as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date that the shareholder’s right to receive payment is exercised, which in the case of quoted securities is normally the ex-dividend date.

Finance costs comprise interest expense on borrowings, dividends on preference shares classified as liabilities, foreign currency losses, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets, and losses on hedging instruments that are recognised in the income statement. All borrowing costs are recognised in the income statement using the effective interest method.

Profit or loss from exchange differences is disclosed in net amount.

m) Income tax expense

Income tax expense comprises current and deferred tax. Income tax expense is accounted for in profit or loss, except to the extent to which they relate to items recognised directly in equity, in which case they are recognised in equity.

Current tax is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous financial years.

Deferred tax is recognised using the balance sheet liabilities method, taking into account the temporary differences between the book value of assets and liabilities for financial reporting purposes and the amounts used for taxation


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purposes. All temporary differences are taken into consideration. Deferred tax is disclosed in the amount expected to be paid when temporary differences no longer exist, based on the legal acts enacted or substantially enacted on the reporting date.

The Company offsets deferred tax assets and liabilities if it is legally entitled to offset recognised assessed tax assets and liabilities, and if they refer to corporate income tax that belongs to the same tax authority in relation to the same taxable unit; or different taxable units that intend to settle the assessed tax assets and tax receivables with the difference, or either simultaneously realise the assets and settle the liabilities.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which a deferred tax asset can be utilised. Deferred tax assets are reduced by the amount for which it is no longer probable that the tax benefit related to an asset could be realised.

Additional income tax that arises from the distribution of dividends is recognised at the same time as the liability to pay the related dividend.

n) Basic earnings per share

The Company presents basic earnings per share (EPS) data for its ordinary shares. The basic earnings per share are calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares in the business year. Diluted earnings per share equal basic earnings per share since the Company does not have preferential shares or convertible bonds.

Segment reporting A segment is a distinguishable component of an enterprise engaged in providing products or services (business segment), or products and services within a particular economic environment (geographical segment), and that is subject to risks and returns that are different from those of other segments. The Company’s segment reporting is based on business segments.

Transfer prices between segments are set on an arm’s length basis.

Segment profit or losses, segment assets and segment liabilities include such items that are directly attributable to a segment, as well as items that can be allocated to a segment on a reasonable basis. Unallocated assets include investments, whereas unallocated liabilities include capital.

New standards and explanations not yet in effectA number of new standards, amendments to stand-ards and interpretations are not yet in effect for the year ended 31 December 2008, and have not been applied in preparing these financial statements:- IFRS 8 – Operating Segments introduces the

“management approach” to segment reporting. IFRS 8, which becomes mandatory for the Com-pany’s 2009 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the Com-pany’s Chief Operating Decision Maker in order to assess each segment’s business performance and to allocate resources to them. Currently, the Company presents segment information in re-spect of its business segment (see Note No. 1).

- Revised IAS 23 – Borrowing Costs removes the option to recognise borrowing costs as expenses and requires that an entity capitalises the bor-rowing costs directly attributable to the acquisi-tion, construction or production of a qualifying asset as part of the historical cost of that asset. The revised IAS 23 will become mandatory for the Company’s 2009 financial statements and will constitute a change in accounting policy. In accordance with the transitional provisions, the Company will apply the revised IAS 23 to those assets for which capitalisation of borrowing costs commences on or after the effective date of the change.

- IFRIC 13 – Customer Loyalty Programmes ad-dresses accounting by entities that operate, or otherwise participate in, customer loyalty programmes for their customers. It relates to customer loyalty programmes under which the customer can redeem credits for awards such as free or discounted goods or services. It is not ex-pected that IFRIC 13, which becomes mandatory for the Company’s 2009 financial statements, will have an impact on the financial statements.

4. Determination of fair value

The company’s accounting policies and disclosures require the determination of fair value in numerous cases, for both financial and non-financial assets and liabilities. Fair values for certain groups of assets have been determined for measurement and/or reporting purposes based on the methods described below. Where required, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.


65

a) Property, plant and equipment

The fair value of property equals the estimated value at which the property could be exchanged on the appraisal date, and following adequate marketing between knowledgeable, willing parties in an arm’s length transaction. The fair value of items of plant, equipment and inventory is based on the market price of similar items.

b) Intangible assets

The fair value of an intangible asset is determined as the present value of estimated future cash flows expected to arise from the use and eventual sale of the asset.

c) Inventories

The fair value of inventory is determined on the basis of its estimated selling price in the ordinary course of business reduced by the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventory.

d) Investments in equity and debt securities

The fair value of financial assets at fair value through profit and loss, held-to-maturity investments and available-for-sale financial assets is determined at bid price at the reporting date. The fair value of held-to-maturity investments is determined only for reporting purposes.

e) Trade and other receivables

The fair value of trade and other receivables is calculated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

f) Non-derivative financial liabilities

The fair value determined for reporting purposes is calculated based on the present value of future principal and interest payments, discounted at the market rate of interest at the reporting date. In financial lease contracts, the market interest rate is determined through a comparison with similar lease contracts.

5. Financial risk management

This section deals with the Company and its expo-sure to certain risks, its objectives, policies and pro-cedures for risk measurement and management,

and its equity management. Other quantitative disclosures are indicated below.

The Management is entirely responsible for estab-lishing the Company’s risk management frame-work.

The risk management policies are designed to identify and analyse risks that can pose a threat to the Company, on the basis of which adequate restrictions and controls are determined, as well as monitored risks and compliance with restrictions. The risk management policies and systems are subject to regular review, and provide updated information on market conditions and the activities of the Company. Through training and risk management standards and procedures, the Company endeavours to develop a disciplined and constructive environment in which all employees are aware of their role and obligations.

Credit riskCredit risk is the risk of suffering financial loss if any of the Company’s clients or parties to a financial instrument contract fail to meet their contractual obligations. Credit risk mainly occurs in relation to the Company’s trade receivables and investment securities.

Trade and other receivablesThe Company’s exposure to credit risk mainly de-pends on individual clients’ characteristics. The de-mographics of the Company’s client base, as well as the payment risk in terms of the branch of industry or country in which a client operates, do not have such a great impact on credit risk. Approximately 3,5% of the Company’s revenues may be attributed to sales transactions with one client alone. In geo-graphical terms, there is no credit risk concentra-tion.

The Company shapes its credit policy according to which a creditworthiness analysis of each new client is made before the Company offers them its standard payment and delivery terms and conditions. The Company review includes any exterior assessments, if available, and also, in certain cases, bank references. Purchase limits – determined in the form of the maximum outstanding amount – are set for each client separately; such limits are reviewed every three months. Any transactions with a client not meeting the standard creditworthiness are carried out solely through advance payments.

Ownership is usually retained in goods until those goods have been paid for in full. In the event of non-payment for goods, the Company’s claim is therefore secured. For operating and other receiva-bles, the Company requires no surety.


66

The Company forms a value adjustment for the amount of impairment, which represents the amount of estimated losses arising from operating and other receivables and investments. The main components of this adjustment are a special part of the loss related to individual key risks, and the joint share of loss, formed for groups of similar as-sets due to incurred losses which are not yet de-fined. An adjustment for the joint amount of loss is determined by taking into account historical data related to statistics of payments for similar financial resources.

Adjustments for trade receivables are formed on the basis of an analysis with regard to recovering each receivable. Adjustment is based on receivables which remain unpaid 90 days after the maturity. In total gross trade receivables at 31 December 2008 the past-due receivables amounted to EUR 1.522 thousand, and receivables that were not yet due amounted to EUR 3.092 thousand.

GuaranteesIn accordance with its policy, the Company pro-vides financial guarantees or sureties solely to sub-sidiaries fully owned by the controlling company. The amount of guarantees is evident in the off-bal-ance-sheet records.

Liquidity riskLiquidity risk is the risk arising from the Company’s inability to meet its financial obligations when they fall due. The Company manages to ensure the high-est possible liquidity by always having sufficient liquid assets available to settle its obligations with-in the set time limits, both under normal and stress-ful circumstances, without incurring unacceptable losses or risking harm to the Company’s reputation.

The valuation of products and services is based on activities aimed at monitoring the Company’s cash flow needs and optimising the return on in-vestments. The Company also ensures that it has sufficient cash (sight deposits) to cover operating expense for a period of 60 days, including servicing financial liabilities; the latter excludes any potential consequences of unpredictable extraordinary cir-cumstances, such as natural disasters.

As of 31 December 2008, the Company had cred-its lines based on the current account principle, which represents approved overdrafts with do-mestic banks totalling EUR 1.300 thousand; the interest rate on that date ranged between 5,175% and 7,015% per year. As of 31 December 2008, ap-proved overdrafts had not been used.

Market riskMarket risk is the risk that changes in market prices, such as exchange rates, interest rates and equity in-struments that may affect the Company’s revenues or the value of financial instruments. The objective of market risk management is to manage and con-trol market risk exposure within reasonable limits, while optimising profit.

The Company trades in financial instruments and assumes financial obligations, both with the aim of managing market risks. All these transactions are carried out in compliance with the Company’s poli-cies. In order to reduce fluctuations in profit or loss to the lowest possible level, the Company makes sustained efforts to use adequate treatment for risk protection purposes.

Currency riskThe Company is not exposed to currency risk. The Company concludes the majority of purchasing deals in its functional currency. The volume of business not concluded in the Company’s functional currency, i.e. USD, GBP and CHF is negligible. As far as sales and borrowing are concerned, transactions are carried out in euros.

Interest rate riskThe Company is exposed to interest rate risks, since a variable interest rate applies to most of its financial liabilities. The Company has so far had no specific protection against changes to interest rates. This is favourable for the company in a period of interest rates - linked to Euribor - falling.

Capital managementThe Board decided to retain a large volume of capital so as to maintain the confidence of investors, creditors and the market, and the Company’s sustainable development. The Supervisory Board monitors the return on equity defined by the Company as net profit or loss divided by average equity, less net profit for the financial year.

The Company endeavours to maintain a balance between higher returns to be ensured through higher loans, and the benefits and security of a strong capital position. The Company’s goal for 2008 was to achieve a 5,95 per cent return on capi-tal employed. The actual return achieved was -1,39 per cent (3,17 per cent in 2007).

During the reporting year, no changes related to capital management occurred at the Company.

The parent company or its subsidiaries were not subject to capital requirements determined by ex-ternal bodies.


67

Income statement disclosures

1. Segment reporting

Sales revenue indicated under item Other comprises revenue from sale of materials, merchandise and fixed assets.

In EUR thousand

Business segments Security printed matter

Commercial printed matter Other Total

2008 2007 2008 2007 2008 2007 2008 2007

Net sales revenue 10.644 9.261 12.105 16.443 2.920 2.707 25.669 28.411

Net profit or loss -647 -139 -736 -246 -178 -40 -1.561 -425

Assets by segments 12.795 11.035 14.551 19.590 3.510 3.226 30.856 33.851

Unallocated assets 15.905 18.860

Total assets 12.795 11.035 14.551 19.590 3.510 3.226 46.761 52.711

Total liabilities 7.508 7.081 8.538 12.571 2.059 2.070 18.106 21.722

Investments 525 1.561 597 2.771 144 456 1.265 4.788

Depreciation expense 1.422 1.165 1.618 2.068 390 341 3.430 3.574

The Company’s business in 2008 was primarily in Europe, which is why it does not report by geographical segments.

2. Revenue

In EUR thousand

Sales revenue by type 2008 2007

Sale of products in domestic market 17.777 19.374

Sale of services in domestic market 601 667

Rental revenues from investment property in domestic market 55 -

Other rental revenues in domestic market 26 88

Sale of products in foreign market 4.831 5.502

Sale of services in foreign market 286 458

Sale of material and merchandise in domestic market 1.277 1.496

Sale of material and merchandise in foreign market 816 826

Total 25.669 28.411

Sales revenue in 2008 also includes revenue from the sale of products and services to group companies, totalling EUR 886 thousand. The company has not generated any revenue from affiliated companies.


68

3. Expenses

In EUR thousand

Cost by primary type, change in value of inventories 2008 2007

Cost of goods and materials sold 1.986 1.345

Cost of used material and services 13.510 15.914

Labour costs 8.480 8.729

Depreciation and amortisation expense 3.430 3.574

Other (operating) expense 521 465Change in inventories of finished products, work in progress and semi-manufactured products

356 -241

Total (operating) expenses 28.283 29.786

Production costs and other costs charged by subsidiaries in 2008 amounted to EUR 21 thousand. No costs incurred in connection with affiliates.

Labour costs

In EUR thousand

2008 2007

Gross wages and salaries 6.091 5.991

Pension insurance costs 778 792

Costs of other social insurance 448 459

Other labour costs 1.163 1.487

Total labour costs 8.480 8.729

The costs of wages and salaries are accounted for in compliance with internal rules and regulations govern-ing wages and other emoluments, the Decree on the amount of costs recognised as deductible expense, and individual employment contracts.

Other labour costs comprise the costs of meal allowances, commuting allowances, holiday bonuses, retirement bonuses, and payroll tax.

In 2008, the Company also allocated EUR 236 thousand for supplementary pension insurance, together with employees, who voluntarily gave up 1,615% of their gross wages for the same purpose. In 2007, the Company paid EUR 237 thousand for this purpose, under the same terms. In 2008, taxes on wages and sala-ries accounted for EUR 100 thousand, which is less than in 2007, when it amounted to EUR 199 thousand.


69

4. Other operating income

In EUR thousand

Type 2008 2007

Gain in disposal of fixed assets 251 100

Income from reversal of provisions 188 476Reversal of value adjustments for trade receivables and inventories

182 36

Indemnities, subsidies and grants received 16 8

Other 417 330

Total 1.054 950

5. Net finance income/finance costs

In EUR thousand

2008 2007

Interest income 246 69

Share-based income 538 254

Income from sale of investments 1.585 541

Other finance income 7 1.533

- change in fair value of investments through profit and loss 7 1.505

- other 28

Total finance income 2.376 2.397

Interest expense 756 640

Foreign exchange losses 10 4

Loss in disposal of investments 137

Other finance costs 2 11

Finance costs arising from impairment 432 10

Total finance costs 1.200 802

Total net finance income 1.176 1.595

6. Taxes

In EUR thousand

2008 2007

Current tax

Deferred tax 32 213

Total 32 213


70 Effective corporate income tax rates

In EUR thousand

2008 2008 2007 2007

Total profit or loss before taxes -385 1.170

Tax effects:

Tax at general tax rate 22,1 % -85 23,0 % 269

Tax exempt income 74,8 % -288 -9,0 % -105

Non-deductible expenses -28,6 % 110 12,7 % 149

Tax relief 2,3 % -9 -8,0 % -94

Tax loss -74,0 % 285 -0,4 % -5

Other changes to tax base -4,9 % 19 -0,1 % -1

Total tax expense -8,3 % 32 18,2 % 213

Deferred taxes recognised directly in equity

In EUR thousand

2008 2007

Investments -419 109

Total -419 109

7. Disclosure of auditor fees

The total amount spent on payment for all auditing services amounted to EUR 26 thousand in 2008. The value of the contract to audit the financial statements for 2008 amounts to EUR 11 thousand.


71

Balance Sheet disclosures

8. Property, plant and equipment

In 2008, the Company invested EUR 754 thousand in property, plant and equipment items. Accounts payable for the purchase of property, plant and equipment amounted to EUR 525 thousand at the end of 2008.

Movements in property, plant and equipment

Land Buildings Equipment Other equipment

PPE in progress

Pre-payments Total

Cost

Balance at 1 January 2007 1.220 14.528 37.111 28 97 52.984

Adjustment of the opening balance

Acquisitions in the period 204 4.093 65 4.362

Acquisition of PPE in progress 4.551 4.551

Transfer from PPE in progress -4.297 -4.297

Disposals 2 1.436 1.438

Reclassifications

Balance at 31 December 2007 1.220 14.730 39.768 28 351 65 56.162

Balance at 1 January 2008 1.220 14.730 39.768 28 351 65 56.162

Transfer to investment property -471 -471

Transfer to assets for sale -85 -85

Acquisitions in the period 183 769 952

Acquisitions of PPE in progress 754 754

Transfers from PPE in progress -951 -951

Disposals 223 4.874 44 5.141

Reclassifications


Value adjustment

Balance at 1 January 2007 7.265 26.798 34.063

Depreciation expense 406 2.848 3.254

Transfer to investment property

Disposals 1.179 1.179

Reclassifications

Balance at 31 December 2007 7.671 28.467 36.138


72

Land Buildings EquipmentOther

equipmentPPE in

progressPre-

paymentsTotal



Transfer to investment property 268 268

Disposals 56 4.449 4.505

Reclassifications


Book value





Disposals made in 2008 mainly comprise the sale of commercially and technically outdated, but still functional machinery.

The company has secured its long-term borrowings with mortgages on real property, liens on movable assets and a lien on long-term financial investments, all of which were accounted for in off-balance-sheet records in the amount equalling the debt at 31 December 2008.

9. Intangible assets

Movements in intangible fixed assets

In EUR thousand

Long-term deferred costs

Long-term property rights

Intangible assets in progress Total

Cost

Balance at 1 January 2007 303 2.599 2.902

Acquisitions in the period 220 220

Acquisitions to investment in progress 237 237

Transfer from investment in progress -220 -220

Disposals 7 7

Balance at 31 December 2007 303 2.812 17 3.132

Balance at 1 January 2008 303 2.812 17 3.133


Acquisitions to investment in progress 512 512


Disposals 2 2



73

Long-term deferred costs

Long-term property rights

Intangible assets in progress

Total

Value adjustment


Amortisation charge 58 262 320

Disposals 7 7

Balance at 31 December 2007 136 1.621 1.757


Amortisation charge 19 249 268

Disposals 2 2


Book value



Balance at 1 January 2008 167 1.191 17 1.375


Long-term property rights include mainly purchases of computer software for the information system. Development costs are recognised costs of projects that prove to be feasible for the project completion and eligible for use or sale. The purpose is to complete the project and sell or use it in view of the probability of economic benefits and the probability of a reliable measurement of costs attributable to the respective intangible asset.

In 2008, the Company invested EUR 512 thousand in long-term property rights stated under acquisitions in the period as investment in PPE in progress. Deferred development costs are recorded for the public documents project.

10. Investment property

At 1 January 2008, the company reclassified a part of fixed assets to investment property, which were leased out in 2008. Investment property is measured at cost and depreciated at the same rate as property in own use. The manner of determining useful life is the same as for property, plant and equipment.

The fair value for investment property at 31 December 2008 cannot be determined. The total area of the property owned by the company measures 20.113m2, of which the investment property, comprising production, warehouse and office premises, as well as the corresponding functional area of the facility, is 1.110m2.

The revenue arising from investment property is disclosed in point no. 2.


74

Movements in investment property

In EUR thousand

Building Total

Cost

Balance at 1 January 2007

Balance at 31 December 2007



Acquisitions of PPE in progress

Transfers of PPE in progress

Disposals

Balance at 31 December 2008 471 471

Value adjustment




Depreciation expense 268 268

Disposals


Book value





11. Investments in group companies

In EUR thousand

Type 2008 2007

Cetis Zagreb 1.691 1.691

Cetis Tirana 5 5

Amba 1.920 1.920

Total 3.616 3.616


75

Companies in the group are:

CETIS – ZG, Company for Trade and Services, d.o.o., Industrijska 11, Sveta Nedelja, Croatia, measured at cost.

AMBA CO., d.o.o., Leskovškova cesta 11, Ljubljana measured at cost.

The Company compiles a consolidated financial statement for the above two companies – Cetis-ZG, d.o.o. and Amba CO, both 100% owned by the controlling company. The subsidiaries submit monthly business reports to the controlling company; the latter conducts analyses and performs an annual internal audit.

Both companies are audited and included in consolidated statements.

The stake in CETIS – TIRANA Sh.p.k.,R.r. Deshmoret e4, Shkurit.P.7, Tirana, Albania is measured at cost. It is also 100% owned by Cetis, d.d. and all business transactions are included in the financial statements of the company Cetis. The company Cetis Tirana acts solely as an intermediary in acquiring business, and has the status of a small enterprise in compliance with the local legislation, and is therefore not obliged to prepare its own financial statements.

Movements in investment in group companies

In EUR thousand

Cost Value adjustment (impairments)

Net amount

Balance at 01.01. 2007 1.696 1.696

Purchase 1.920 1.920

Balance at 31.12.2007 3.616 3.616

Balance at 01.01.2008 3.616 3616

Purchase

Balance at 31.12.2008 3.616 3.616

12. Investments in affiliates Affiliated companies are:- Lotaria Nacionale SH.A Rruga Kavajes, Porta Kry Esore, Misto Mame, Tirana. The investment is

measured at cost.- Druckman Hungary, in which the Company holds a 33% stake. Since the affiliated company has

not operated for several years, we have formed a value adjustment for the entire amount, and the company is not disclosed in movements in investments.

In EUR thousand

Type 2008 2007

La Societe Nationale des Loteries Sportives (SNLS), Libreville, Gabon - 31% ownership

47

KIG KGA, Production, Trade, Engineering d.o.o. - 50 % ownership 17Lotaria Nacionale SH.A, Rruga Kavajes, Porta Kry Esore, Misto Mame, Tirana - 46,6 % ownership

8 8

Druckman Ipari Kereskedelmi es Szolgaltto Korlatolt, Budapest, Hungary

Total 8 72


76

In 2008, the company performed a capital increase in the company SNLS Gabon, but the investment amount was reclassified to assets held for sale, as we are planning to sell the company.

13. Investments available for sale

Among available-for-sale investments, 77,4% of investments are valued at initially recognised amount, i.e. at cost.

In EUR thousand

Type 2008 2007

Available-for-sale investments 12.283 13.016

Movements in available-for-sale investments

In EUR thousand

Cost Value adjustment (impairment) ) Net amount

Balance at 1 January 2007 13.960 13.960


Sale -4.718 -4.718Change in fair value 438 438

Balance at 31 December 2007 13.016 13.016

Balance at 1 January 2008 13.016 13.016PurchaseTransfer from short-term investments

1.731 1.731

Sale -32 -32

Change in fair value -2.433 -2.433


14. Loans

In EUR thousand

Type 2008 2007

Loans 334 1.550

Loans granted as at 31 December 2008 include loans to employees for the purchase of apartments and construction, funds invested in the purchase of long-term bonds issued by a bank, and deposits granted.


77

Movments in loans granted

in EUR thousand

CostValue adjustment

(impairment)Net amount


Increase 500 500

Repayments 221 221

Transfer to short-term loans 32 32

Exchange rate difference



Increase

Repayments

Transfer to assets for sale 1.187 1.187


Exchange rate difference


15. Movements in longterm investments

In EUR thousandType 2008 2007

Other long-term business assets of associates

878

Total: 878

Movements in non-current trade receivables

in EUR thousand

Cost Value adjustment (impairment) Net amount


Increase 878 878


Balance at 1 January 2008 878 878

Transfer 878 878



78

16. Deferred tax assets and liabilities

In EUR thousand

Tax assets31.12.2008

Tax assets31.12.2007

Tax liabilities31.12.2008

Tax liabilities31.12.200a7

Assets - liabilities

31.12.2008 31.12.2007

Investments 445 21 26 132 419 -111

Receivables 49 52 49 52

Inventories Provisions for retirement bonuses

180 209 180 209

Other provisions

Tax loss 67 81 67 81

Total 741 363 26 132 715 231

The Company used a 21% tax rate in deferred tax accounting

Deferred tax liabilities are based on surpluses arising from the revaluation of available-for-sale investments, measured at fair value through equity.

Deferred tax assets are based on provisions for anniversary bonuses and retirement bonuses, tax loss and temporary differences arising from accounting for income tax on receivables and other provisions to be recognised for tax purposes in subsequent periods.

The Company recognised deferred tax assets for the tax loss based on the estimate that, in the coming years, taxable profits will be available against which the deferred tax assets can be used in the future. In periods of tax loss utilisation, a decrease in deferred tax assets will represent a corresponding decrease in profits. The unused tax loss records as at 31 December 2008 amounted to EUR 1.547 thousand.

Movements in temporary differences in 2007

In EUR thousand

1.1.2007 Recognised under income/expenses

Recognised under equity 31.12.2007

Investments -224 4 109 -111

Receivables 49 3 52

Inventories 25 -25 Provisions for retirement bonuses, other

246 -37 209

Other provisions 17 -17

Tax loss 222 -141 81

Total 335 -213 109 231


79


In EUR thousand

1.1.2008Recognised

under income/expenses

Recognised under equity

31.12.2008

Investments -111 14 516 419

Receivables 52 -3 49Provisions for retirement bonuses, other

209 -29 180

Other provisions

Tax loss 81 -14 67

Total 231 -32 516 715

17. Assets held for sale

In 2008, the company injected capital in the company SNLS GABON amounting to EUR 2.249 thousand, by which it became a 93,63 per cent owner of this company’s issued shares. The investment is valued at cost and was reclassified to non-current assets held for sale. The sales efforts for this investment include active marketing.

In EUR thousand

Type 2008 2007

Property, plant and equipment 85

Other non-current assets 2.297

Total 2.382

18. Inventories

In EUR thousand

Type 2008 2007

Material 1.544 1.641

Work in progress 242 518

Products 1.064 1.144

Merchandise 3 5

Total 2.853 3.308

For the year 2008, the Company wrote off assets in the amount of EUR 478 thousand related to materials and products which were no longer usable. The largest product write-offs were related to documents, labels, wrappings and lottery tickets as a result of the use of inadequate materials and replacing exist-ing documents with new documents. The Company managed to reduce the related costs in part through claims concerning the materials, which is reflected among production costs.A surplus of EUR 70 thousand was recorded in 2008 in inventories, and a deficit of EUR 72 thousand in material assets.


80

Value adjustments are accounted for by type of inventory and its change. No new value adjustments were required other than those made in past periods. When examining the inventories of materials, products and merchandise that showed no change for more than 12 months, the Company applied the same poli-cies as in preceding years.

19. Current investments at fair value

In EUR thousand

Type 2008 2007

Short-term investment 2.156

Total 2.156

When accounting for a regular purchase or sale of a financial asset, the amount is recognised or reversed, respectively, taking into consideration the date of payment.

Due to the drop in stock exchange quotations in financial markets, the company decided not to trade in those securities in the short-term. Pursuant to the Commission Regulation amending the Regulation adopting certain international accounting standards (IAS 39 and IFRS 7), a decision was made to reclassify short-term financial investment at fair value to long-term investment held for sale, based on the invest-ment balance at 30 June 2008. If the company could have already reclassified the assets on 1 January 2008, the net profit or loss for the business year would have been EUR 425 thousand higher. If the reclassification were not performed, the profit or loss would be lower by EUR 582 thousand.

Movements in short-term investments

In EUR thousand

CostValue

adjustments (impairment)

Net amount

Balance at 1 January 2007 1.839 1.839Transfer after allocation to shares held for sale

-98 -98

Sale -188 -3 -185

Change in fair value 610 10 600

Balance at 31 December 2007 2.163 7 2.156

Balance at 1 January 2008 2.163 7 2.156

Transfer to non-current assets -1.731 -1.731

Sale Change in fair value until transfer -425 -425Balance at 31 December 2008 7 7


81

20. Short-term loans

In EUR thousand

Type 2008 2007

Short-term loans granted 568 386

Short-term deposits 300

Current portion of long-term loans 29 32

Total 897 418

21. Trade and other receivables

In EUR thousand

Type 2008 2007

Current trade receivables 3.716 5.055

Current trade receivables from group companies 126 198

Current trade receivables from affiliated companies 14 9

Other current trade receivables 310 138

Current prepayments 13 34

Total 4.179 5.434

22. Cash and cash equivalents

In EUR thousand

Type 2008 2007

Cash in banks, cheques and cash in hand 2 1

Deposits in banks 954 500

Total 956 501

23. Equity

Total equity consists of issued capital, share premium account, legal and statutory reserves, retained earn-ings, own shares (deducted from equity), and fair value reserve. The Company issued 200.000 no par value shares registered at the Central Securities Clearing Corporation (KDD).

In EUR thousand

Basic capital 2008 2007

Basic capital 10.015 10.015

Total 10.015 10.015

Capital reserves amounting to EUR 17.859 thousand consist of simplified reversal of share capital by with-drawing shares amounting to EUR 2.215 thousand and general capital value adjustment amounting to EUR 15.644 thousand.


82

In EUR thousand

Capital reserves 2008 2007

Simplified reversal in equity by withdrawing shares 2.215 2.215

General equity value adjustment 15.644 15.644

Total 17.859 17.859

Legal and statutory reserves totalling EUR 1.927 thousand include legal reserves amounting to EUR 1.709 thousand, statutory reserves amounting to EUR 191 thousand, and reserves for own shares amounting to EUR 26 thousand. Legal reserves are formed every year in the amount of 10% from net profit for the period, remaining after covering loss, forming legal reserves and forming reserves for own shares in compliance with the Companies Act and the Articles of Association.

In EUR thousand

Legal and statutory reserves 2008 2007

Legal reserves 1.709 1.709

Reserves for own shares 26 26

Statutory reserves 191 191

Total 1.927 1.927

In 2008, the company bought back no own shares. At 31 December 2008, it reported ownership in 201 shares designated CETG. The shares are recognised at cost as a deductible item in equity.

In EUR thousand



Total 26 26

Fair value reserve in 2008 decreased because of the drop in exchange quotations. The accumulated reserve arising from surplus from value adjustment in long-term investments is negative, amounting to EUR 1.995 thousand. The company formed deferred receivables from the state arising from that, in the amount of EUR 419 thousand.

Establishing profit for appropriation

In EUR thousandPostavka 2008 2007

A. NET PROFIT OR LOSS FOR THE BUSINESS YEAR - 417 957

B. NET PROFIT / LOSS FROM PREVIOUS PERIODS 873 107

C. INCREASE IN RESERVES FROM ROFIT (1 to 1) 191

1. increase in statutory reserves 191

D. PROFIT FOR APPROPRIATION (A+B-C) 456 873


83

24. Basic earnings per share.

Net loss per share is calculated by dividing basic net loss for the year by the weighted average number of shares. Diluted loss per share is identical, as the Company holds neither any preference nor convertible shares. 25. Borrowings

Borrowings comprise long-term and short-term borrowings, including the current portion of long-term borrowings.

Long-term borrowings

In EUR thousand

Type 2008 2007

Bank loans 6.064 8.445

The largest single loan is the loan for financing a long-term investment, totalling EUR 6.400 thousand, with a 7-year repayment period and its principal already being repaid.

Short-term borrowings

In EUR thousand

Breakdown per type 2008 2007

Current portion of long-term loans from banks repayable within one year

2.590 2.718

Short-term bank loans 1.900 52

Other short-term loans 1.240 1.190

Total 5.730 3.960

2008 2007

Basic earnings / loss in EUR -417.028 957.197

Weighted average number of ordinary shares 199.799 199.799

Basic earnings / loss per share in EUR -2,09 4,79


84

Loan repayments

In EUR thousand

Breakdown per type Total repayment 2008 Interest 2008 Principal 2008

Short-term loans up to 1 year 4.833 150 4.683

Long-term loans, 1 to 5 years 1.980 575 1.405

Long-term loans with maturity longer than 5 years 1.313 1.313

Total 8.126 725 7.401

Type Total repayment 2007 Interest 2007 Principal 2007

Short-term loans up to 1 year 3.881 57 3.824

Long-term loans, 1 to 5 years 1.841 583 1.258

Long-term loans with maturity longer than 5 years 985 985

Total 6.707 640 6.067

The Company made no distinction between interest on long-term loans by maturity, and therefore the interest covers the period from 1 to 5 years.

26. Non-current trade payables

In EUR thousand

Type 2008 2007

Non-current trade payables based on prepayments 3 3

Total 3 3

The Company received a prepayment based on a contract, and according to its maturity, disclosed it under non-current trade payables.

27. Provisions

In EUR thousand

Type 2008 2007

Provisions for warranties 71 99

Provisions for legal actions 29 89

Provisions for other costs 26

Provisions for anniversary bonuses 233 231

Provisions for retirement bonuses 677 743

Total 1.010 1.188


85

Movements in provisions

In EUR thousand

Type 31.12.2007 Made used reversed 31.12.2008

Provisions for warranties 99 43 71 71

Provisions for legal actions 89 60 29

Provisions for other costs 26 26

Provisions for anniversary bonuses 231 34 32 233

Provisions for retirement bonuses 743 9 57 677

Total 1.188 77 41 214 1.010

Provisions are formed in accordance with contracts, legal bases and expert opinions. The Company re-viewed the provisions already made, took account of changes, and decreased total provisions for the pur-pose of long-term deferred expenses and provisions for long-term accrued costs.

Provisions for retirement obligations and anniversary bonuses

On the basis of a calculation for each employee using the projected unit method, prepared by a certified ac-tuary, the Company reduced provisions for retirement obligations and anniversary bonuses in the amount of EUR 64 thousand.

28. Trade and other payables

In EUR thousand

Razčlenitev po vrstah 2008 2007

Trade payables 4.006 5.319

Current trade payables based on prepayments 308 1.328

Payables to employees 532 557

Payables to state and other institutions 231 416

Other payables 196 374

Total 5.273 7.994

The bases for trade and other liabilities are the original documents that define an event in terms of time and substance.

29. Off-balance sheet record

In EUR thousand

Type 2008 2007

Mortgages 8.866 14.155

Other bank guarantees, liens granted and shares 7.498 13.259

Tax loss 1.547 395

Investment and other reliefs 49 9

Other 77 77Total 18.037 27.895


86

Disclosures to Cash Flow Statement

The Cash Flow Statement was prepared under the indirect method, using data from the Balance Sheet at 31 December 2008 and the Balance Sheet at 31 December 2007, and from the data of the 2008 Income Statement, as well as additional data required for the adjustment of inflows and outflows to ensure an adequate breakdown of major items.

30. Financial instruments - risk managment

Risk exposure and management

Currency risks in the Company regarding the euro were almost entirely excluded. Almost all foreign trans-actions outside the EMU were also made in EUR.

The Company is aware of the importance attributed to the regular control and management of financial risks to which the Company is exposed in the markets, and views it as a relevant precondition for successful operations and achieving strategic goals. In 2008, interest rate risks were predominant (a general drop in interest rates, except for new debts). The analysis of these risks resulted in an estimate that the interest rate risk was higher due to new short-term borrowings of the Company or guarantees issued. The Company also expects these risks to increase in the future as a result of the operations of the parent company and its subsidiaries.

All long-term debts are denominated in euros. Interest rates are based on the market principles governing the price of money in the European banking market. Interest rate risks have not been hedged so far, as the Company assessed that the interest rate fixations offered are still above the variable rates, or that long-term changes in interest rates will allow more favourable costs of financing during the whole borrowing period.

- Interest rate risks increased due to the amount of loans, and sudden decreases and increases in interest rates. The interest rate level was assessed to be still acceptable for all long-term loans taken, with its con-tractually agreed variability, and taking into account their maturity. The downward trends are favourable. The Company’s exposure to interest rate risks is otherwise estimated to be high.

- Property risks and related risks in 2008 were systematically and analytically assigned to insurance com-panies.

- Liquidity risks are low at Cetis over the short term as a result of efficient asset management, adequate credit lines for regulating cash flow, satisfactory financial flexibility and good access to the necessary financial resources, whereby the Company takes into account the circumstances in the financial environ-ment and financial markets.


87

Financial instruments – credit risk

In EUR thousands

Notes 31.12.2008 31.12.2007

Available-for-sale financial assets 12.282 13.016

Financial assets at fair value through profit or loss 2.156

Loans granted 1.231 1.968

Current and non-current trade receivables 4.179 6.312

Cash and cash equivalents 956 501

Total 18.648 23.953

The highest credit risk exposure for deposits or loans at the reporting date by geographical region was as shown in the table below:

Book value

In EUR thousands 2008 2007

Domestic 663 398

Other European countries 568 383

Other regions – Africa 1.187

Total 1.231 1.968

The highest credit risk exposure for trade receivables at the reporting date by geographical region was as follows:

Book value


Domestic 3.094 3.943

Euro zone countries 452 304

Other European countries 332 462

Other regions - Africa 301 1603

Total 4.179 6.312

The highest credit risk exposure for trade receivables at the reporting date by type of customer was as follows:

Book value


Wholesale customers 1.117 1.087

Customers, end users 3.062 5.225

Total 4.179 6.312


88

Impairment losses

Trade receivables on the reporting date:

In EUR thousands Gross value 2008 Impairment 2008 Gross value 2007 Impairment 2007

Non-past-due 3.331 6.177

Past due 0-30 days 515 4 347

Past due 31-120 days 212 15 321 64

Past due 121-365 days 123 37 53 53

More than 1 year 706 652 840 809

Total 4.887 708 7.738 926


Balance at 1 January 926 947

New value adjustments 58 64

Written-off value adjustments -55 -49

Paid written-off value adjustments

-221 -36

Balance at 31 December 708 926

Currency risk

In EUR thousands

EUR USD GBP CHF DKK EUR USD CHF DKK GBP

31.12.2008 31.12.2007

Trade receivables 4.007 6.619

Accounts payable -3.978 -5 -33 -1 -5.214 -111 -12 -26

Secured bank loans

Balance sheet gross exposure 29 -5 -33 -1 1.405 -111 -12 -26

The Company is not exposed to any specific currency risks.

Liquidity risk

31/12/2008 in EUR thousand Bookvalue

Contractualcash flow

Up to 6 months

From 6 to 12 months

From 1 to 2 years

From 2 to 5 years

Over 5 years

Secured bank loans 8.655 -9.321 -1.482 -1.432 -2.696 -3.711

Other loans 1.240 -1.330 -351 -979 Accounts payable and other liabilities

5.276 -5.276 -5.276

TOTAL 15.171 -15.927 -7.109 -2.411 -2.696 -3.711

3-month euribor 31.12.2008 2,928

6-month euribor 31.12.2008 3,000


89

31/12/2008 in EUR thousand Bookvalue

Contractualcash flow

Up to months

From 6 to 12 months

From 1 to 2 years

From 2 to 5 years

Over 5 years

Transaction account (TRR) overdraft

52 -54 -54

Secured bank loans 11.163 -12.810 -1.789 -1.628 -3.140 -6.253

Other loans (account 2726000) 1.189 -1.235 -301 -934 Accounts payable and other liabilities

7.994 -7.994 -7.994

Total 20.398 -22.093 -10.138 -2.562 -3.140 -6.253

3-month euribor 31.12.2007 4,684

6-month euribor 31.12.2007 4,707

Interest rate risk

At the reporting date, loan contracts concluded by Cetis, d.d. were with a fixed and variable interest rate.

In EUR thousands

Instruments with a fixed interest rate 2008 2007

Financial assets 2.091 1.223

Financial liabilities -889 -889

Difference 1.202 334

Instruments with a variable interest rate 2008 2007

Financial assets 718

Financial liabilities -10.905 -11.515

Difference -10.905 -10.797

Sensitivity analysis for instruments with a fixed interest rate

A change in interest rates by one percentage point at the reporting date would result in an increase or decrease in equity of EUR 6 thousand.

Sensitivity analysis of cash flow for instruments with a variable interest rate

A change in interest rates by one percentage point at the reporting date would result in an increase (decrease) in equity of EUR 13 thousand.

Interest rates used to determine fair value.

2008 2007

Cash, loans, deposits 0,1% - 7,015% 0,2% - 7%

Fair value


90 Fair value and book value of assets and liabilities

In EUR thousand

Note Book value 31.12.2008

Fair value 31.12.2008

Book value 31.12.2007


Available-for-sale investments 12.282 12.282 13.016 13.016

Loans granted 334 334 1.550 1.550

Non-current trade receivables 878 878Investments at fair value through profit and loss

2.156 2.156

Trade and other receivables 4.179 4.179 5.434 5.434

Short-term loans granted 897 897 418 418

Cash and cash equivalents 956 956 501 501

Long-term borrowings -6.064 -6.064 -8.445 -8.445

Short-term borrowings -5.730 -5.730 -3.960 -3.960

Trade and other payables -5.272 -5.272 -7.994 -7.994

Total 1.582 1.582 3.554 3.554

Such investment is usually impaired if the purchase value in the period of five successive years exceeds the realisable value on the balance sheet cut-off date. When valued at fair value through capital, it is checked five years from the date of acquiring such investment for the probability that such investments need to be impaired.

Available-for-sale long-term investments are measured at fair value and depend on the recognition of the investment at the rate of 31 December 2008. Accumulated fair value reserve arising from surplus from revaluation of long-term investments is negative, amounting to EUR 1.995 thousand. Based on this, the company also formed deferred receivables from the state amounting to EUR 419 thousand.

Testing investments in terms of possible impairment

The company performed no impairment of investments. Upon acquiring an investment in mutual funds and other investment companies, the company classifies them as long-term investments if the intention is to own such investment for more than one year. If such investment is listed on the stock exchange, it is entered in books at fair value; if it is not listed, it is valued at cost. When an investment in mutual funds and other investment companies is valued at cost, it is tested five years from the date of investment acquisition to estimate whether the investment should be impaired.


91An investment is usually impaired when its fair value is continuously lower than the investment purchase value in five successive years. Impairment is performed in compliance with IAS 39.

For all other investments valued at fair value through capital, verification of possible impairment was performed on the balance sheet date, comparing the percentage of decrease in fair value of an investment in the period from the date of its recognition until the balance sheet cut-off date, as well as relative change in the Slovenian Share Index (SBI 20). The amount of investments revaluation that would have to be performed after checking for possible impairment is an insignificant item in the company.

For investments valued at cost, checking for possible impairment was performed on the balance sheet cut-off date. Checking for possible impairment of investments valued at cost was performed by comparing the investment book value from the most recent known statements with the investment purchase value. Insofar as the discrepancy from the book value was high, the review was performed by assessing the current value of future benefits. No impairment was required.

Loans granted and obtained are valued on the basis of recalculating the repaid value using the effective interest rate, which is the same as the contractual interest rate. Calculations are therefore based on the contractual interest rate.

For trade and other receivables, we have taken into account impairment to fair value due to the recovering of claims. With regard to their short-term nature, trade and other liabilities are not discounted.

Other disclosures

Disclosures by groups of persons: members of the Management Board, Supervisory Board, and staff employed under individual employment contracts.

- Management Board 113 thousand EUR,- Other staff employed under individual employment contracts (12 persons) 1.060 thousand EUR,- Supervisory Board13 thousand EUR.The loan repayments under earmarked loans granted by the Company to persons from these groups amounted to EUR 0,5 thousand in 2008.

Related-party transactions

The transactions between the Company and related parties were based on contracts of sale, whereby market prices of products and services

Post balance sheet events

Major post balance sheet events are described in the introduction section of the Business Report.


92

CETIS GROUP FINANCIAL REPORT


93

Independent Auditor’s Report


94 Statement of Management responsibility

The Management Board is responsible for preparing the financial statements so that they give a true and fair view of the state of affairs at the end of the financial year, and of profit or loss for the period.

The Management Board confirms that suitable accounting policies have been applied consistently and that the accounting estimates that have been made are reasonable and prudent. The Management Board also confirms that the financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have been prepared on a going concern basis.

The Management Board recognises its responsibility for keeping proper accounting records, the adoption of appropriate measures for safeguarding the Company’s assets, and preventing and detecting fraud and other irregularities.

30 april 2009 Simona Potočnik MSc, General Manager


95

Consolidated Income Statement

In EUR thousand

Notes 2008 2007

REVENUE 1 35.967 39.520

Cost of goods sold 2 -4.913 -4.942

Production costs -20.655 -23.182

Cost of goods sold and production costs -25.568 -28.124

GROSS PROFIT 10.399 11.396

Other (operating) income 3 1.203 1.011

Distribution expenses 2 -5.777 -5.719

Administrative expenses 2 -6.705 -6.635

Other (operating) expenses 2 -287 -476

= Other income, costs and expenses (5+6+7+8) -11.567 -11.819

OPERATING PROFIT OR LOSS EXCLUDING FINANCE COSTS -1.168 -423

Finance income 4 2.425 2.426

Finance costs 4 -1.195 -1.554

NET FINANCE COSTS 1.230 872

PROFIT OR LOSS BEFORE TAXATION 63 449

Tax 5 -12 276

NET PROFIT 75 173

Profit attributable to minority interest -11

Profit attributable to majority owner 86 173

Basic and diluted earnings per share (in EUR) 22 0,38 0,86


96

Consolidated Balance Sheet

In EUR thousand

Notes 31.12.2008 31.12.2007

ASSETS

1. Property, plant and equipment 8 22.408 27.304

2. Intangible assets 9 2.489 2.185

3. Investment property 7 203

4. Investments in group companies

5. Investments in affiliates 10 18

6. Available-for-sale investments 11 13.443 14.305

7. Loans 12 334 1.249

8. Long-term trade receivables 13 878

9. Deferred tax assets 14 743 364

SA. Total non-current assets 39.619 46.303

0. Non-current assets available for sale 15 2.381

1. Inventories 16 3.750 4.186

2. Current investments at fair value 17 2.156

3. Short-term loans 18 1.074 362

4. Corporate income tax assets

4. Trade and other receivables 19 6.617 7.738

6. Cash and cash equivalents 20 1.042 1.003

SB. Total current assets 14.864 15.446

S. TOTAL ASSETS 54.483 61.749


97

In EUR thousand

Notes 31.12.2008 31.12.2007

EQUITY AND LIABILITIES

1. Issued capital 10.015 10.015

2. Share premium account 17.859 17.859

3. Reserves (legal and statutory) 1.927 1.901

4. Retained earnings from previous periods 183 134

Retained earnings for the period 86 173

5. Own shares held -26 -26

6. Fair value reserve -1.576 341

Translated (consolidated) equity adjustment -27

- from capital -28

- from profit 1

Minority interest capital 53

KO.A Total equity 21 28.495 30.396

1. Borrowings 23 8.770 11.841

2. Non-current operating liabilities 24 26 78

- for guarantees 71 99

- for lawsuits 29 88

- for anniversary bonuses and retirement bonuses 947 1.014

- other long-term provisions 23 40

3. Provisions 25 1.070 1.242

5. Deferred tax liabilities 14 310 571

KO.B.a) Total non-current liabilities 10.176 13.731

1. Borrowings 23 8.615 7.652

2. Trade and other liabilities 26 7.197 9.970

KO.B.b) Total current liabilities 15.812 17.622

KO.B Total liabilities 25.988 31.353

KO. TOTAL EQUITY AND LIABILITIES 54.483 61.749

Off-balance sheet assets (liabilities) 27 23.172 33.030


98

Consolidated Cash Flow

In EUR thousand

2008 2007

CASH FLOW FROM OPERATING ACTIVITIES

Profit or loss for the period 75 173

Adjustments for: 3.773 4.512

Depreciation of property, plant and equipment 3.803 3.832

Amortisation of intangible assets 296 339

(Reversal of ) impairment loss -211 179

Negative translation differences 28 13

Change in biological assets

Change in investment properties

Finance income -1.585 -541

Finance costs 1.562 1.115

Share of affiliated companies in profits / losses -18 -54

Gain on disposal of property, plant and equipment -84 -57

Revenue from a decrease in long-term provisions -102 -374

Deferred state grants

Expenses for share-based payment transactions settled in equity

Tax expenses 84 60CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES IN NET OPERATING ASSETS AND PROVISIONS 3.848 4.685

Increase in biological assets

Change in trade and other receivables 959 -2.353

Change in inventories 525 -308

Change in trade and other payables -3.366 3.272

Change in provisions and employee benefits -69 8

CASH FLOW GENERATED BY OPERATIONS -1.951 619

Interest paid -954 -820

Income tax paid

Revenue from sale arising from discontinuing operations, excl. tax

NET CASH FLOW FROM OPERATING ACTIVITIES 944 4.484


99

In EUR thousand

2008 2007

CASH FLOW FROM INVESTING ACTIVITIES

Proceeds from sale of property, plant and equipment 84 57

Proceeds from sale of investments -742 541

Interest received 216 72

Dividends received 538 254

Sale of subsidiary, net of cash disposed of 10

Acquisition of subsidiary, net of cash acquired

Purchase of property, plant and equipment 880 -9.546

Acquisition of investment property

Expenditure on other investment 876 -1.169

Purchases of intangible assets -600 -1.028

NET CASH FLOW FROM INVESTING ACTIVITIES 1.263 -10.819

2008 2007

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from issue of share capital

Proceeds from issue of convertible bonds

Proceeds from issue of redeemable preference shares

Share buyback

Movements in equity -59 5

Borrowings 8.939 18.543

Repayment of borrowings -11.047 -12.267

Repayment of liabilities from long-term financial lease

Payment for transaction costs (issuing shares, bonds)

Dividends paid -1

NET CASH FLOW FROM FINANCING ACTIVITIES -2.168 6.281

Net increase in cash and cash equivalents 38 -54

Cash and cash equivalents at beginning of period 1.003 1.057

Exchange gains / (losses) on cash and cash equivalents

CASH AND CASH EQUIVALENTS AT END OF PERIOD 1.042 1.003


100

Consolidated Statement of Changes in Equity

In EUR thousand

Issued capital Capital Legal and statutory reserves Own shares Profit Fair value reserve Majority interest

capitalMinority interest

capital Total capital

Balance at 1 January 2006 10.015 17.859 1.709 -26 -689 134 29.002

Profit 2006 999 999

Exchange differences CETIS ZG,IPI,BS 7 7

Dividends on own shares 1 1

Increase in fair value 556 556

Balance at 31 December 2006 10.015 17.859 1.709 -26 317 690 30.564

Profit 2007 173 173

Allocation to statutory reserves 192 -192

Payment of bonuses -20 -20Adjustment from previous years - refund Tax Administration of the Republic of Slovenia

25 25

Translation differences CETIS ZG 3 3


Balance at 31 December 2007 10.015 17.859 1.901 -26 306 341 30.396 30.396

Profit 2008 86 86 -11 75

Profit 2007-unconsolidated BG -5 -5 -3 -8Adjustment from previous years – provisions for own shares

26 -26

Dividend payment

Reserves for own shares

Translation reserve -92 -27 -119 -119

Decrease in fair value -1.917 -1.917 -1.917

Increase in minority interest 67 67

Balance at 31 December 2008 10.015 17.859 1.927 -26 269 -27 -1.576 28.441 53 28.495

The Management Board of Cetis, d.d. approves the financial statements and notes thereto for the financial year ended on 31 December 2008.


101

In EUR thousand

Issued capital Capital Legal and statutory reserves Own shares Profit Fair value reserve Majority interest

capitalMinority interest

capital Total capital

Balance at 1 January 2006 10.015 17.859 1.709 -26 -689 134 29.002

Profit 2006 999 999

Exchange differences CETIS ZG,IPI,BS 7 7

Dividends on own shares 1 1

Increase in fair value 556 556

Balance at 31 December 2006 10.015 17.859 1.709 -26 317 690 30.564

Profit 2007 173 173

Allocation to statutory reserves 192 -192

Payment of bonuses -20 -20Adjustment from previous years - refund Tax Administration of the Republic of Slovenia

25 25

Translation differences CETIS ZG 3 3


Balance at 31 December 2007 10.015 17.859 1.901 -26 306 341 30.396 30.396

Profit 2008 86 86 -11 75

Profit 2007-unconsolidated BG -5 -5 -3 -8Adjustment from previous years – provisions for own shares

26 -26

Dividend payment

Reserves for own shares

Translation reserve -92 -27 -119 -119

Decrease in fair value -1.917 -1.917 -1.917

Increase in minority interest 67 67

Balance at 31 December 2008 10.015 17.859 1.927 -26 269 -27 -1.576 28.441 53 28.495

The Management Board of Cetis, d.d. approves the financial statements and notes thereto for the financial year ended on 31 December 2008.


102


103

Summary of significant accounting policies and notes to the financial statements

1. Group profile

The Group’s core business is the provision of comprehensive solutions in the field of communications through printed media and other types of media. The corporate vision is of the company as the leading company of its type in Slovenia, with appropriate developmental, investment and marketing activities and the best qualified staff, looking ahead to increase its market share also outside Slovenia. The Company of-fers a programme of diversified printed matter, such as security, variable and commercial printed matter, graphic design, including accessory services, such as the personalisation of documents, the implementa-tion and personalisation of micro chips or magnetic tapes, archiving, identity management and consul-tancy, project management and other services.

The Group’s consolidated financial statements for the year that ended on 31 December 2008 comprise the Company and its subsidiaries, as well as the Group’s stakes in affiliated companies. Consolidation for the company Cetis Print d.o.o., Beograd was performed on the basis of the simultaneous consolidation method.

The group comprises

Cetis, d.d., Celje Parent company stakeCetis-ZG, d.o.o., Zagreb 100%Cetis Print, d.o.o., Belgrade (65% owned by Cetis-ZG, d.o.o.) 65%AMBA CO., d.o.o., Ljubljana 100%

La Societe Nationale des Loteries Sportives (SNLS), Gabon 93,63%

The company La Societe Nationale des Loteries Sportives, Gabon became a subsidiary upon a capital in-crease in 2008; at the same time, the parent company decided to sell it in the short-term, and the invest-ment was therefore reclassified to non-current assets available for sale. The company in Gabon is not active, which is the reason that no financial statements were prepared at 31 December 2008, and the company was therefore not included in the consolidated financial statements. Based on the previous year’s financial statements, the conclusion was that the assets and the sales revenue and total costs for the subsidiary comprise less than 5% of the corresponding Group item, which is an insignificant share, regarding Group policies, and does not need to be included in the consolidated financial statements.

In the previous period, the company was included in consolidated financial statements as an affiliated company, and valued by the equity method. In 2008, all effects of the equity method were abrogated in consolidated financial statements; the same are recognised as financial income amounting to EUR 348 thousand.

Affiliated companies

Company Equity stake in %

Company’s own capital

In EUR thousand

Company’s Profit

In EUR thousandDruckman, Hungary – does not operate 33%Lotaria Nacionale SH.A, Rruga Kavajes, Porta Kry Esore, Misto Mame, Tirana

46,6% -865 -733


104

2. Basis for preparation of consolidated fi-nancial statements

a) Statement of compliance

The 2008 consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and the interpretations by the IFRS Interpretations Committee (IFRSIC), as adopted by the European Union.

The Management Board approved the consolidated financial statements on 18 April 2008.

b) Basis for measurement

The 2008 consolidated financial statements were prepared on a historical cost basis, except for the following cases that were measured at fair value:

• financial instruments at fair value through profit or loss,

• available-for-sale financial assets,• investment property.

The methods used to measure fair value are de-scribed below.

c) Functional and presentation currency

The consolidated financial statements are present-ed in Euros, i.e. in the Company’s functional cur-rency and are rounded off to EUR thousand.

d) Use of estimates and judgements

The preparation of consolidated financial state-ments in accordance with International Financial Reporting Standards (IFRS) requires the Manage-ment to make judgements, estimates and assump-tions that affect the application of accounting poli-cies and the reported amounts for assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are re-viewed on a regular basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods af-fected.

3. Significant accounting policies

The accounting policies set out below have been applied consistently by the Group companies to all periods presented in these consolidated financial statements.

a) Basis for consolidation

SubsidiariesSubsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. When assessing the impact, the existence and effect of potential voting rights that are currently exercisable or convertible should be considered. The financial statements for subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. When required, the accounting policies of subsidiaries have been modified or adapted to those of the Group.

Affiliates and joint ventures (jointly controlled entities accounted for using the equity method)Affiliates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. A significant influence exists if a group holds from 20 to 50 per cent of votes in another entity.

Affiliates are accounted for using the equity method. Upon initial recognition, they are measured at historical cost. The Group’s investment comprises goodwill established upon acquisition, and net value of losses incurred due to impairment. Affiliates are accounted for using the equity method. The consolidated financial statements include the Group’s share in profits and losses of affiliated entities, calculated using the equity method, after the alignment of accounting policies, from the date that significant influence commences until the date that it ceases. When the Group’s share of losses in a jointly controlled entity exceeds its share in the entity, the book value of that share (including all long-term investments) is reduced to nil, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of a jointly controlled entity.

Transactions eliminated on consolidationAny balances, income and expenses, and unrealised gains and losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with jointly controlled


105

entities are eliminated to the extent of the Group’s interest in the affiliate. Unrealised losses are eliminated in the same manner as unrealised gains, providing that there is no evidence of impairment.

b) Foreign currency

Transactions in foreign currency Any transactions disclosed in foreign currency are converted into the relevant functional currency of the Group companies at the exchange rate applicable on the date of transaction.

Assets and liabilities expressed in a foreign currency are translated into EUR on the date of the event and at the end of the accounting period, using the (ECB) reference exchange rate of the Bank of Slovenia.

Monetary assets and liabilities stated in a foreign currency at the balance sheet date are translated into functional currency at the applicable exchange rate. The foreign exchange gains or losses are the differences between the amortised cost in the functional currency at the beginning of the period, adjusted by the amount of effective interest and the payments effected during the accounting period, as well as the amortised cost expressed in a foreign currency and translated at the exchange rate at the end of the period. Non-monetary assets and liabilities stated in a foreign currency and measured at fair value are translated into the functional currency at the exchange rate effective on the date on which the fair value was set. Foreign exchange gains and losses are recognised in the income statement.

Foreign entitiesAssets and liabilities of foreign entities are translated into EUR at the exchange rate effective on the balance sheet date. Revenues and expenses of foreign entities are translated into EUR at average exchange rates effective on the date of conversion.

c) Financial instruments

Non-derivative financial instrumentsNon-derivative financial instruments include investments in equity and debt securities, trade and other receivables, cash and cash equivalents, borrowings and loans, and trade and other liabilities.

Non-derivative instruments are recognised initially at fair value, increased by the costs that are directly attributable to the transaction. Subsequent to initial recognition, non-derivative financial instru-ments are measured as explained below.

Cash and cash equivalents comprise cash in hand and demand deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents in the Cash Flow Statement.

Accounting of finance income and finance costs is described in point l) Finance income and finance costs.

Available-for-sale financial assetsThe Group’s investments in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to initial rec-ognition, these investments are measured at fair value. The changes in fair value, except for impair-ment losses, are recognised directly in equity. When an investment is derecognised, the related gain or loss in equity is transferred to profit and loss.

Investments at fair value through profit or lossAn instrument is classified at fair value through profit or loss if it is held for trading, or is designated as such upon initial recognition. Financial instru-ments are designated at fair value through profit or loss if the Group is able to manage such invest-ments, as well as make purchase and sale decisions based on their fair value. Upon initial recognition, attributable costs for a transaction are recognised in profit or loss when incurred. Financial instru-ments at fair value through profit or loss are meas-ured at fair value, and a change in fair value is rec-ognised in profit or loss.

OtherOther non-derivative financial instruments are measured at amortised cost using the effective in-terest method, less any impairment losses.

Share capitalOrdinary sharesavadne delniceOrdinary shares form an integral part of the share capital.

Share buybackWhen own shares are bought back, the amount of consideration paid, including directly attributable costs, and excluding potential tax effect, is recog-nised as a change in equity. Repurchased shares are classified as own shares and deducted from equity. When own shares are sold, the amount received is recognised as an increase in equity, and the result-ing surplus or loss in the transaction is recognised in equity.


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d) Property, plant and equipment

Presentation and measurementItems of property, plant and equipment are recognised at cost, less accumulated depreciation expense and accumulated impairment loss. At the date of transition to IFRS, property, plant and equipment were carried at their hypothetical cost at 1 January 2005.

Cost includes expenditure that is directly attrib-utable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materi-als, direct labour costs and any other costs directly attributable to bringing the asset to a working con-dition for its intended use, and the costs of disman-tling and removing the assets and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equip-ment is capitalised as part of that equipment. Bor-rowing costs related to the purchase or construc-tion of property are recognised in profit or loss as incurred.

Parts of an item of property, plant and equipment with different useful lives are accounted for as sep-arate items of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined as the differ-ence between the proceeds from disposal of the item compared to the carrying amount, and are recognised among ‘other operating income’ in the Income Statement.

Subsequent costs related to property, plant and equipment

The cost of replacing a part of an item of property, plant and equipment is recognised in the book val-ue of the item if it is probable that future economic benefits related to that part will flow to the Group, and its purchase value can be reliably measured. All other costs, such as day-to-day servicing, are ex-pensed in profit or loss when incurred.

DepreciationDepreciation is calculated on a straight-line basis over the useful lives of each part of an item of prop-erty, plant and equipment. Land is not

Depreciation rates are based on the estimated use-ful life of the assets as shown below:

In years min In years max


Buildings 7 40

Equipment for graphic activity 3 20

Laboratory equipment 3 10

Vehicles 5 8

Telephone sets, telegraph switchboard 3 5

Furniture 5 6

Typewriters, computer equipment 3 8

Computer equipment for fire safety 3 3

Measurement and control appliances 4 6

Useful life is determined and examined in accordance with the Rules on accounting and finance. Deprecia-tion methods, useful life and residual value are reviewed at the reporting date in accordance with the Rules on accounting and finance.


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Gains and losses on disposal of an item of property, plant and equipment are determined as the differ-ence between the proceeds from disposal of the item compared to the carrying amount, and are recognised among ‘other operating income’ in the Income Statement.

Subsequent costs related to property, plant and equipment

The cost of replacing a part of an item of property, plant and equipment is recognised in the book val-ue of the item if it is probable that future economic benefits related to that part will flow to the Group, and its purchase value can be reliably measured. All other costs, such as day-to-day servicing, are ex-pensed in profit or loss when incurred.

DepreciationDepreciation is calculated on a straight-line basis over the useful lives of each part of an item of prop-erty, plant and equipment. Land is not

Depreciation rates are based on the estimated use-ful life of the assets as shown below:

e) Intangible assets

GoodwillGoodwill (badwill) arises upon the acquisition of subsidiaries, affiliated companies and joint ventures.

Acquisitions as from date of transition to IFRSIn acquisitions made on or after 1 January 2006, goodwill is defined as the surplus or difference be-tween the purchase price and the Group’s share in the net fair value of identified assets, liabilities and contingent liabilities of the acquired company. If the surplus is negative (badwill), it is directly recog-nised in the Income Statement.

Subsequent measurementGoodwill is carried at cost, reduced by any accumulated impairment losses. For the recipient of investments calculated on the basis of equity method, the book value of goodwill is included in the investment book value.

Research and developmentExpenditure on research activities to obtain new scientific and professional knowledge and understanding is recognised in the income statement among expenses when incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. An expense for development is recognised if it can be reliably measured, if the product or process is technically and operationally feasible, if there is a potential for future economic benefits, if the Group has adequate resources for the completion of development, and if it intends to use or sell such assets. The recognised expenditure comprises the cost of materials, direct labour costs and other costs which can be directly attributed to qualifying the asset for its intended use. Borrowing costs related to development of assets and other expenditure are recognised in the income statement as incurred.

Capitalised development expenditure is measured at cost, less accumulated amortisation and incurred impairment losses.

Other intangible assetsOther intangible assets acquired by the Group, which have finite useful lives, are measured at cost, less accumulated depreciation expense and incurred impairment losses.

Subsequent expenditureSubsequent expenditure related to intangible assets is capitalised only when it increases the future economic benefits arising from the specific asset to which it relates. All other expenditure is recognised in the income statement as expenditure when incurred.

DepreciationDepreciation is calculated on a straight-line basis over the useful lives of intangible assets. Depreciation of an asset begins when the asset is available for use. The estimated useful lives for the current and comparative periods are as shown below.

Depreciation rates are based on the useful life of the assets, as follows:

In years min

In years max

Intangible assets 3 10

f) Investment property

An investment property is a property owned in order to bring rent or increase the value of a long-term investment, or both. Investment property therefore creates cash flow which is highly independent of other assets owned by the company. As an investment property is defined: •Landownedtoincreasethevalueofalong-term investment, not for sale in the near future as part of regular business operations:

- land for which the company has not deter-mined its future use;

- building owned or in financial lease, which is leased out on the basis of a single or multiple operational lease;

- vacant building owned on the basis of single or multiple operational lease, and

• in caseswhen,with regard to assetdetermina-tion, a part of property is investment property and another part a tangible fixed asset, but they cannot be sold separately, the whole asset is de-termined as an investment property if the part which is a tangible fixed asset is insignificant; otherwise, the whole asset is recognised as a tan-gible fixed asset. Whether the proportion is sig-nificant or not is determined by the competent employee for the area.

Measuring recognised valueThe company measures investment property based on a historical cost model. The historical cost of purchased investment property comprises its purchase price and all


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directly attributable costs. Directly attributable costs include, for example, attributable fees for legal services, tax on property transfer, and other costs of the transaction.The historical cost of a property constructed within the company comprises its cost up to the date when construction or development was completed. On that date, the property becomes investment property.

DisposalInvestment property ceases to be recognised upon disposal, or when it is permanently withdrawn from use and no future economic benefits can be expected from its disposal.

Profit or loss from discontinuation or disposal of investment property has to be established as the difference between net gains upon disposal and the book value of assets, and recognised in the income statement.

DepreciationInvestment property is depreciated at the same rate as investments used by the company. The method of determining their useful life is the same as that used to determine the useful life of tangible fixed assets.

g) Leased assets

Leases in terms of which the Group assumes all the essential risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the fair value or the present value of the minimum sum of lease payments, whichever is lower. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

h) Inventories

Inventories are measured at historical cost or net realisable value, whichever is lower. The cost of inventories is based on the First-In-First-Out method (FIFO), and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated

costs of completion and estimated costs of sale.

i) Impairment of assets

Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective sign that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows arising from that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows, discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.

Significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed for impairment collectively, in groups that share similar credit risk characteristics.

All impairment losses are recognised in the income statement for the period. Any current loss in respect of a financial asset which was not recognised directly in equity is transferred to profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, an impairment loss cannot be reversed through profit or loss.

Non-financial assets At each reporting date, the book value of non-financial assets of the Group, other than inventories and deferred tax assets, is examined to discover any indication of impairment. If there is such an indication, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite useful lives, or that are not yet available for use, the recoverable amount is estimated at each reporting date.

The recoverable amount of an asset or cash-generating unit is the value in use or its fair value, less costs of sale, whichever is higher. In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market


109

assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (‘cash-generating units’). The goodwill acquired in a business combination is, for the purpose of impairment testing, allocated to cash-generating units that are expected to benefit from the synergies of the combination.

An impairment is recognised if the book value of an asset or a cash-generating unit exceeds its recoverable amount. Impairment is recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the book value of any goodwill allocated to the units and then to reduce the book value of other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each balance sheet date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s book value does not exceed the book value that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised in previous periods.

j) Employee benefits

Other long-term employee benefits. The net liability of the Group that arises in connection with long-term employee benefits is a sum of future benefits paid to employees in exchange for their work performed in the current and previous periods. Thus calculated, the sum of benefits is discounted in order to determine its present value, and then reduced by the fair value of all related assets. At the reporting date, the discount rate is the recorded yield of AA rated bonds, with the maturity approximately the same as the maturity of the Group’s liabilities. The calculation is made using the projected unit credit method. Any actuarial gains and losses are recognised in the profit or loss in the period in which they occur.Short-term employee benefits

Liabilities for short-term employee benefits are measured on an undiscounted basis and are expensed when the related service is provided. The liability is disclosed in the amount for which

payment is expected in the form of a premium, payable within twelve months after the expiry of the period of performing the work, or a profit distribution scheme, if the Group has a present legal or constructive obligation to make such payments due to previous work performed by the employee and such obligation can be measured reliably.

k) Provisions

A provision is recognised if, as a result of a past event, the Group has present legal or constructive obligations that can be estimated reliably, and it is probable that an outflow of factors enabling economic benefits will be required to settle the obligation. Provisions are determined by discounting expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Warranties for products and servicesA provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

l) Revenues

Revenues from products soldRevenue from the sale of products is measured at fair value of the consideration received or the related receivables, net of returns and price reductions, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer; when certainty exists regarding recovery of the consideration and the associated costs or possible return of goods and when there is no further Group involvement with the products sold; and when the level of revenue can be reliably measured.

Transfers of risks and rewards vary, depending on the individual terms of the contract of sale. For sales of goods, transfer usually occurs when the product is received at the customer’s warehouse; however, for some international shipments, transfer occurs upon loading goods onto the relevant carrier.

Revenues from servicesRevenue from services rendered is recognised in the income statement in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed.


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Rental incomeRental income is recognised in income on a straight-line basis over the term of the lease.

m) Finance income and finance costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets and changes in the fair value of financial assets held for trading through profit or loss, which are recognised in the income statement. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

Dividend income is recognised in the income statement on the date that the shareholder’s right to receive payment is exercised; in the case of quoted securities, this is usually the ex-dividend date.

Finance costs comprise borrowing costs, dividends on preference shares classified as liabilities, foreign currency losses, changes in the fair value of financial assets at fair value through profit or loss, and impairment losses recognised on financial assets that are recognised in profit or loss. All borrowing costs are recognised in profit or loss, using the effective interest method.

Exchange gains and losses are disclosed in net amounts.

n) Income tax

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement, except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet liabilities method, taking into consideration temporary differences between the book value of assets and the liabilities for financial reporting purposes and the amounts used for taxation purposes. All temporary differences are taken into consideration. Deferred tax is recognised in the amount expected to be paid upon reversal of the temporary differences, in compliance with laws in force or substantively enacted on the reporting date.

Deferred tax assets and liabilities are offset if the Group has a legally enforceable right to offset current tax liabilities and assets, and if they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, when they intend to settle current tax liabilities and assets on a net basis, or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which a deferred tax asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Additional income tax that arises from the distribution of dividends is recognised at the same time as the liability to pay the related dividend is recognised.

o) Basic earnings per share

The Group presents basic earnings per share data for its ordinary shares. The basic earnings per share are calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares in the period. Diluted earnings per share are identical, as the Group holds neither any preference nor convertible shares.

p) Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and returns that are different from those of other segments.

The Group’s segment reporting is based on business segments.

Inter-segment pricing is determined on an arm’s length basis.

Segment profit or loss, assets and liabilities include items directly attributable to a segment, as well as those that can be allocated to a segment on a reasonable basis. Unallocated assets include investments, whereas unallocated liabilities include capital.


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r) New standards and explanations not yet in effect A number of new standards, amendments to standards and explanations are not yet in effect for the year ended 31 December 2008, and have not been applied in preparing these financial statements:

IFRS 8 – Operating Segments introduces the “management approach” to segment reporting. IFRS 8, which becomes mandatory for the Group’s 2009 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the Group’s Chief Operating Decision Maker in order to assess each segment’s performance and to allocate resources to them. Currently, the Group presents segment information in respect of its business segment.

Revised IAS 23 – Borrowing Costs removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the purchase value of that asset. The revised IAS 23 will become mandatory for the Group’s 2009 financial statements and will constitute a change in accounting policy. In accordance with the transitional provisions, the Group will apply the revised IAS 23 to qualifying assets for which capitalisation of borrowing costs commences on or after the effective date.

IFRIC 13 – Customer Loyalty Programmes addresses the accounting by entities that operate, or otherwise participate in, customer loyalty programmes for their customers. It relates to customer loyalty programmes under which the customer can redeem credits for awards such as free or discounted goods or services. It is not expected that IFRIC 13, which becomes mandatory for the Group’s 2009 financial statements, will have an impact on financial statements.

4. Determining fair value

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes for groups of assets based on the methods below. When applicable, further information on the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

a) Property, plant and equipment

The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The fair value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of items of plant and equipment is based on the offered market price of similar items.

b) Intangible assets

The fair value of intangible assets is determined as the present value of estimated future cash flows expected to originate from their use and eventual sale.

c) Inventories

The fair value of inventories in business combinations is determined on the basis of their expected sales value achieved in ordinary business operations, reduced by the estimated cost of completion and the estimated costs of sale and an adequate margin related to the work for completion and sale of inventories.

d) Investment in equity and debt securities

The fair value of financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial assets is determined by reference to their quoted bid price at the reporting date. The fair value of held-to-maturity investments is determined for disclosure purposes only.

e) Trade and other receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

f) Non-derivative financial liabilities

Fair value, which is specified for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market interest rate is determined by reference to similar lease agreements.


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5. Financial risk management

The Group is exposed to the following risks arising from financial instruments:

- credit risk,- liquiditi risk,- market risk.

This section deals with the Group and its exposure to the above risks, its objectives, policies and proce-dures for risk measurement and management, and its equity management.

The Management is entirely responsible for design-ing the framework for the Group’s risk manage-ment.

Risk management policies are designed to iden-tify and analyse risks that can pose a threat to the Group. On this basis, appropriate restrictions and controls are determined, and risks are monitored and restrictions considered. The risk management policies and systems are subject to regular review, and updated information regarding market condi-tions and the activities of the Group is therefore regularly communicated. The Group endeavours, through training and risk management standards and procedures, to develop a disciplined and con-structive environment in which all employees are aware of their role and obligations.

Credit riskCredit risk is the risk of suffering financial loss should any of clients or parties to a financial instrument contract fail to meet their contractual obligations. Credit risk mainly occurs in relation to the Group’s trade receivables and investment securities.

Trade and other receivablesThe Group’s exposure to credit risk mainly depends on individual client’s characteristics. The demographics of the Group’s client base, as well as payment risk in terms of the branch of industry or country in which a client operates does not have such a strong impact on credit risk. Approximately 2.5% of Group’s revenues may be attributed to sales transactions with one client alone. In geographical terms, there is no credit risk concentration.

The Group shapes its credit policy on the basis of a creditworthiness analysis of each new client, which is made before the Group offers them its standard payment and delivery terms and conditions. The client review includes any external evaluations, if available, and in certain cases, bank references. Purchase limits – determined in the form of a maximum outstanding amount – are set for each client separately and reviewed every three months.

Any transactions with a client not meeting the standard creditworthiness test are carried out solely through advance payments.

Ownership is retained in goods until they have been paid for in full. In the event of non-payment for goods, the Group’s claim is therefore secured. As for trade and other receivables, the Group requires no surety.

The Group forms value adjustments for the amount of impairment, representing the amount of estimated losses arising from trade and other receivables, as well as investments. The main elements of this value adjustment are a special portion of the loss related to individual key risks, and the total loss, formed for groups of similar assets due to incurred losses not yet defined. The value adjustment for the total amount of loss is determined by taking into account historical data related to payment statistics for similar financial resources.

Value adjustments for trade receivables are made on the basis of an analysis with regard to recovering each receivable. Adjustment is based on receivables which remain unpaid 90 days after maturity.

InvestmentsThe Group reduces its credit risk exposure through investments in the liquid securities of contractual parties with adequate credit ratings.

GuaranteesIn accordance with its policy, the Group provides financial guarantees or sureties solely to subsidiaries fully owned by the controlling company. As of 31 December 2008, the Company records guarantees granted under off-balance sheet items.

Liquidity riskLiquidity risk is the risk arising from the Group’s inability to meet its financial obligations when they fall due. The Group manages to ensure the highest possible liquidity by always having sufficient liquid assets available to settle its obligations within the set time limits, both under normal and stressful circumstances, without incurring unacceptable losses or risking harm to the Group’s reputation. The valuation of products and services is based on activities aimed at monitoring the Group’s cash flow needs and optimising the return on investments. The Group also ensures it has sufficient cash (sight deposits) to cover operating expense for a period of 60 days, including servicing financial liabilities; the latter excludes any potential consequences of unpredictable extraordinary circumstances, such as natural disasters.


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Market riskMarket risk is the risk that changes in market prices, such as exchange rates, interest rates and equity instruments that may affect the Group’s revenues or the value of financial instruments. The objective of market risk management is to manage and control market risk exposure within reasonable limits, while optimising profit.The Group trades in financial instruments, and assumes financial obligations, both with the aim of managing market risks. All these transactions are carried out in compliance with the Group’s policies. In order to reduce fluctuations in profit or loss to the lowest possible level, the Group makes sustained efforts to use accounting treatment for risk protection purposes.

Currency riskThe Group is exposed to currency risk in the spheres of both purchase and sales - namely in transactions in currencies that are not functional currencies of the Group companies. The Group conducts most of its transactions in EUR, HRK, USD, GBP, CHF and DKK. As far as borrowings are concerned, transactions are carried out in euros. The Group has undertaken no special hedging against currency risks.

Interest rate riskThe Group is exposed to interest rate risks, since a variable interest rate applies to most of its financial liabilities. The Group has so far had no specific hedging against changes to interest rates.

Capital managementThe Management Board has made a decision to keep a large volume of capital, in order to maintain the confidence of investors, creditors and the market, and the sustainable development of the Group. The Supervisory Board monitors the return on equity defined by the Group as basic earnings divided by average equity, less net profit for the financial year.

During the reporting year, no changes related to capital management occurred in the Group.Neither the parent company nor its subsidiaries were subject to capital requirements determined by external bodies.

6. Segment reporting

Breakdown per segment

Security printed matter

Commercial printed matter

Other Total

2008 2007 2008 2007 2008 2007 2008 2007

Net sales revenue 10.644 9.261 17.404 27.552 7.919 2.707 35.967 39.520

Net profit or loss -647 -139 186 -243 -130 -41 -591 -423

Assets by business segment 12.795 11.035 18.978 31.008 8.971 3.226 40.744 45.270

Unallocated assets 13.443 16.479

Total assets 12.795 11.035 18.978 31.008 8.971 3.226 54.187 61.749

Total liabilities 7.508 7.081 12.540 22.202 5.661 2.070 25.709 31.354

Investments 525 1.561 1.134 2.963 397 452 2.056 4.976

Depreciation 1.422 1.165 1.776 2.666 903 341 4.101 4.171

Sales revenue stated under ‘Other’ comprises revenue from sale of materials, merchandise and property, plant and equipment.

The Group does business mainly in Europe, which is why it does not report by geographical segment.


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Income Statement disclosures

1. Revenue

In EUR thousand

Sales revenue by type 2008 2007

Sale of products in domestic market 20.402 21.837

Sale of services in domestic market 738 740

Gains from investment property 55

Rental revenue in domestic market 33 121

Sale of products in foreign market 6.532 14.028

Sale of services in foreign market 376 458

Sale of material and merchandise in domestic market 1.229 1.509

Sale of material and merchandise in foreign market 6.601 826

Total 35.967 39.520

2. Expenses

In EUR thousand

Expenses by primary type, change in value of inventories 2008 2007

Cost of goods and materials sold 4.913 4.942

Cost of materials and services used 18.265 20.661

Labour costs 10.127 10.421

Depreciation and amortisation expense 4.120 4.171

Other (operating) expense 621 928Change in inventories of finished products, work in progress and semi-manufactured products

291 -170

Total (operating) expense 38.337 40.953

Labour costs

In EUR thousand

2008 2007

Gross wages and salaries 7.431 7.354

Pension insurance cost 798 814

Cost of other social insurance 581 604

Other labour cost 1.318 1.649

Total labour costs 10.127 10.421


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The costs of wages and salaries are accounted for in compliance with collective agreements, internal rules and regulations governing wages and other emoluments, the Decree on the amount of costs rec-ognised as deductible, and individual employment agreements. Other labour costs comprise those of meal allowances, commuting allowances, holiday bonuses, retirement bonus, and payroll tax.

3. Other operating income

In EUR thousand

Item 2008 2007

Gain in disposal of fixed assets 269 107

Reversal of impairment of property, plant and equipment 95

Income from reversal of provisions 188 476

Capitalised own products and services Reversal of value adjustments for trade receivables and inventories

212 38

Indemnities, subsidies and grants received 16 29

Other 422 360

Total 1.203 1.011

4. Net finance income/finance costs

In EUR thousand

2008 2007

Interest income 249 82

Share-based income 563 254

Foreign exchange gains 16 8

Income from sale of investments 1.585 541

Other finance income 13 1.541

- change in fair value of investments through profit or loss 1.505

- other 13 36

Total finance income 2.425 2.426

Interest expense 733 956

Foreign exchange losses 28 13

Loss in disposal of investments 137

Other finance costs 2 437

Finance costs arising from impairment 432 10

Total finance costs 1.195 1.554

Total net finance income 1.230 872


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5. Taxes

In EUR thousand

2008 2007

Current tax 84 60

Deferred tax (from income statement) -96 217

Total -12 277

Effective corporate income tax rates

In EUR thousand

2008 2008 2007 2007

Total profit or loss before tax 62 450

Tax effects:

Tax at general tax rate 22,0% 14 23,0% 104

Adjustment for tax rate from other tax territories -13,0% -8 -2,0% -9

Tax exempt income -466,6% -288 -23,3% -105

Tax increased income 4,0% 2

Non-deductible expenses 209,5% 129 27,4% 124

Losses for which no deferred tax is recognised -46 92,2% 415

Tax relief -34,6% -21 -21,0% -95

Tax loss 364,9% 225 -43,1% -194

Other changes to tax base -30,9% -19 8,3% 37

Total tax expense -19,8% -12 61,5% 277

Deferred taxes recognised directly in equity

In EUR thousand

2008 2007

Property, plant and equipment 27 -435

Investments 516 109

Total 543 -326

6. Disclosure of auditor fees

The total amount spent on all auditing services amounted to EUR 19 thousand in 2008.


117

Disclosures of Consolidated Balance Sheet items

7. Investment property

Investment property

In EUR thousand

2008 2007

Land

Buildings 203

Total 203

Movements in investment property

In EUR thousand

2008 2007

Value at cost


Additions

Disposals

Transfers from property, plant and equipment 471

Other transfers


Value adjustment


Depreciation expense 12

Transfer from property, plant and equipment 256


Book value



The amount of income arising from investment property is disclosed under No 1.


118

8. Property, plant and equipment

In 2008, the Group invested EUR 909 thousand in buildings and equipment.

Movements in property, plant and equipment

In EUR thousand

Land Buildings Equipment

Other equipment

PPE in progress

Pre-payments Total

Cost


Arising on acquisition 2.392 1.516 1.204 5.112


Acquisitions in the period 206 4.222 65 4.493

Change to PPE in progress 254 254

Transfers -33 45 -92 80

Disposals 2 1.586 1.588

Reclassification




Arising on acquisition

Transfer for available-for-sale assets

-85 -85


46 46

Acquisitions in the period 183 907 754 1.844

Change to PPE in progress 198 16 -1.149 -935

Transfers

Disposals 694 786 4.905 44 6.429

Reclassification


Value adjustment

Balance at 1 January 2007 7.366 27.312 104 34.782


Disposals 1.273 1.273

Transfers 104 -104

Reclassification



Adjustment to the opening balance

11 11



Disposals 207 4.474 4.681

Transfers


119

In EUR thousand

Land Buildings Equipment Other equipment

PPE in progress

Pre-payments Total

Reclassification


Balance at 01.01. 2007 1.518 8.508 11.334 15 215 21.591

Balance at 31.12. 2007 3.910 9.673 13.080 27 549 65 27.304

Balance at 01.01. 2008 3.910 9.673 13.080 27 549 65 27.304

Balance at 31.12. 2008 3.216 8.747 10.328 27 69 21 22.408

Disposals made in 2008 mainly comprise the sale of commercially and technically outdated, yet still func-tional machinery.The Group secured its long-term borrowings with mortgages on real property, pledged plant and equip-ment, and liens on long-term investments, all of which are recognised in off-balance sheet records.

Property, plant and equipment acquired under financial lease

In EUR thousand

Type 2008 2007 2006

Equipment 64 368 283

9. Intangible assets

Long-term property rights mainly include computer software for the renovation of the business infor-mation system. Development costs are the recognised costs of projects that prove to be feasible for the project completion and eligible for use or sale. The purpose is to complete the project and sell or use it in view of the probability of economic benefits and the capability of reliably measuring the costs attributable to the respective intangible asset. In 2008, the Group invested EUR 512 thousand in intangible assets.The Group disclosed goodwill in the amount of EUR 627 thousand arising from the acquisition of AMBA CO., d.o.o., Ljubljana subsidiary in 2007. Goodwill arises from the acquired company’s good position in foreign markets.


120

Movements in intangible assets

In EUR thousand

Goodwill Deferred costsLong-term

property rights

Intangible assets in progress Total

Cost


Arising on acquisition 627 5 103 735Acquisitions in the period 257 257Change to investment in progress 37 37

Transfer from investment in progress

Disposals 7 7

Reclassification

Balance at 31 December 2007 627 303 2.897 140 3.967

Balance at 1 January 2008 627 303 2.897 140 3.967

Arising on acquisition


Change to investment in progress 512 512

Adjustment to the opening balance 81 81


Disposals 4 4

Reclassification -1 -1


Value adjustment


Amortisation expense 58 281 339

Disposals 6 6



Amortisation expense 19 277 296

Adjustment to the opening balance

Disposals 2 2


Book value



Balance at 1 January 2008 627 166 1.252 140 2.185



121

10. Investments in affiliates

Affiliated companies include:• Druckman Hungary,

in which the Company holds a 33% stake, for which it has made value adjustment for the entire investment, since the affiliated company has not operated for several years and is not disclosed in movement in investments.

• Lotaria Nacionale SH.A Rruga Kavajes, Porta Kry Esore, Misto Mame, Tirana. The stake is measured using the equity method.

In EUR thousand

Type 2008 2007

Lotaria Nacionale SH.A Rruga Kavajes, Porta Kry Esore, Misto Mame, Tirana - 46,6 % ownershipDruckman, Hungary – the company is not active

KIG KGA, Production, Trade, Engineering d.o.o. 18

Total 18

In 2008, the company sold a 50% stake in the affiliated company KIG KGA d.o.o. Gains from the sale of the stake are recognised in financial revenue as revenue from disposal of investments.

Due to new facts known in 2008 and 2009, financial revenue in the amount of EUR 70 thousand was recog-nised in consolidated financial statements for 2008, based on the equity method, arising from the recogni-tion of loans granted to affiliated company in the full amount, as the loans will be repaid in full.

Movements in investments in affiliates

In EUR thousand

Cost Net amount



Disposal of investment -18 -18


11. Available-for-sale investments

In EUR thousand

Type 2008 2007

Available-for-sale investments 13.443 14.305


122

Movements in available-for-sale investments

In EUR thousand


(impairment) Net amount

Balance at 1 January 2006 12.998 -172 12.826


Sale -2.230 172 -2.058

Change in fair value 723 723



Sale -4.718 -4.718

Change in fair value 438 438


Transfer from short-term investments 1.731 1.731

Transfer to group companies 128 128

Purchase

Sale -32 -32

Change in fair value -2.433 -2.433


12. Loans

In EUR thousand

Type 2008 2007

Loans 334 1.249

Loans granted as at 31 December 2008 include loans to employees for the purchase of apartments and construction, funds invested in long-term bonds issued by a bank, and a granted deposit.


123

Movements in loans

In EUR thousand


(impairment) Net amount


Increase 770 770

Repayments 93 93


Exchange differences


Increase 500 -301 199

Repayments 221 221


Balance at 31 December 2007 1.550 -301 1.249

Increase

Transfer to available-for-sale assets 1.187 -301 886

Repayments



13. Non-current trade receivables

In EUR thousand

Type 2008 2007

Other non-current trade receivables for affiliated companies 878

Skupaj 878

Movements in non-current trade receivables

In EUR thousand

Cost Value adjustment (impairment) Net value


Increase 878 878



Transfer to non-current assets available for sale 878 878



124

14. Deferred tax assets and liabilities


In EUR thousand

Assets Liabilities Assets-liabilities

31.12.2008 31.12.2007 31.12.2008 31.12.2007 31.12.2008 31.12.2007

Property, plant and equipment 284 439 -284 -439

Investments 445 21 26 132 419 -111

Receivables 49 52 49 52

Inventories

Provisions for retirement bonus 181 210 181 210

Other provisions

Tax loss 67 81 67 81

Total 742 364 310 571 432 -207

The Group used a 21% tax rate in deferred tax accounting. Deferred tax liabilities are based on surpluses arising from the revaluation of available-for-sale investments, measured at fair value through equity.

Deferred tax assets are based on provisions for anniversary bonuses and retirement bonuses, tax loss, and temporary differences arising from accounting for income tax on investments, receivables, inventories and other provisions to be recognised for tax purposes in subsequent periods.

The Group recognised deferred tax assets for the tax loss based on the estimate that taxable profits will be available in the coming years, against which the deferred tax assets can be used in the future.

In periods of tax loss utilisation, a decrease in deferred tax assets will represent a corresponding decrease in profits.


In EUR thousand

1.1.2007 Recognised under income/expenses Recognised under equity 31.12.2007

Property, plant and equipment -4 -435 -439

Investments -224 4 109 -111

Receivables 48 4 52

Inventories 25 -25

Provisions for retirement bonus 247 -37 210

Other provisions 18 -18

Tax loss 222 -141 81

Total 336 -217 -326 -207


125


In EUR thousand

1.1.2008Recognised under income/expenses Recognised under equity 31.12.2008

Property, plant and equipment -439 128 27 -284

Investments -111 14 516 419

Receivables 52 -3 49

Inventories

Provisions for retirement bonus 210 -29 181

Other provisions

Tax loss 81 -14 67

Total -207 96 543 432

15. Non-current assets held for sale

In EUR thousand

Type 2008 2007

Property, plant and equipment 85

Investment SNLS Gabon 2.297

Total 2.382

Non-current assets available for sale comprise assets to be sold probably for a short term. These assets are currently being marketed.

16. Inventories

In EUR thousand

Type 2008 2007

Material 1.972 2.126

Work in progress 267 539

Products 1.180 1.287

Merchandise 331 234

Total 3.750 4.186

For the year 2008, the Group wrote off assets related to materials and products which were no longer usable. The largest product write-offs related to labels, plastic cards and wrappings, as well as documents, as a result of using inadequate material.

Value adjustments are accounted for per type of inventory and movement. When reviewing inventories in warehouses storing items under complaint, inventories of materials, products and merchandise that showed no movement for more than 12 months, the Group applied the same policies as in preceding years.


126

17. Short-term financial investments at fair value

In EUR thousand

Type 2008 2007

Current investments 2.156

Total 2.156

Based on the EU Commission Regulation amending Regulation adopting certain international accounting standards (IAS 39 and IFRS 7), all current investments valued at fair value were transferred to long-term investments available for sale based on the investment balance at 30 June 2008.

When accounting for the regular purchase or sale of a financial asset, the amount is recognised or reversed, respectively, taking into consideration the date of payment.

Due to the drop in stock exchange quotations in financial markets, the company decided not to trade in those securities in the short-term. Pursuant to the Commission Regulation amending the Regulation adopting certain international accounting standards (IAS 39 and IFRS 7), a decision was made to transfer short-term financial investment at fair value to long-term investment available for sale, based on the investment balance at 30 June 2008. If the company could have reclassified the assets already on 1 January 2008, the net profit or loss for the business year would have been higher by EUR 425 thousand. If the reclassification were not performed, the profit or loss would be lower by EUR 582 thousand.

In EUR thousand

Cost Value adjustment (impairment) Net amount


Transfer after allocation to available-for-sale shares -98 -98

Sale -188 -3 -185

Change in fair value 610 10 600

Balance at 1 January 2008 2.163 7 2.156Transfer to non-current investments (EU Commission Regulation)

-1.731 -1.731

Sale

Change in fair value until transfer -425 -425


18. Short -term loans

In EUR thousand

Type 2008 2007

Short-term loans 615 330

Short-term deposits 430

Current portion of long-term loans 29 32

Total 1.074 362


127

19. Trade and other receivables

In EUR thousand

Type 2008 2007

Current trade receivables 6.107 7.426

Current trade receivables from group companies

Current trade receivables from affiliates 14 9

Current trade receivables from third parties 416 256

Current prepayments 80 47

Total 6.617 7.738

20. Cash and cash equivalents

In EUR thousand

Type 2008 2007

Cash in banks, cheques and cash in hand 88 503

Deposits in banks 954 500

Total 1.042 1.003

21. Equity

The total equity of the Group consists of issued capital, totalling EUR 10.015 thousand; share premium accounts amounting to EUR 17.859 thousand; legal and statutory reserves, totalling EUR 1.927 thousand; retained earnings, amounting to EUR 269 thousand; own shares (deducted from equity) in the amount of EUR 26 thousand; and fair value reserve, which is negative, amounting to EUR 1.576 thousand.

The Group issued 200.000 unit shares, subscribed with the Central Securities Clearing Corporation (KDD).

In EUR thousand

Share capital 2008 2007

Share capital 10.015 10.015

Total 10.015 10.015

Capital reserves in the amount of EUR 17.859 thousand correspond to a simplified reversal of share capital by withdrawing shares amounting to EUR 2.215 thousand and general capital value adjustment amount-ing to EUR 15.644 thousand.

In EUR thousand

Capital reserves 2008 2007

Simplified reduction in share capital by withdrawing shares 2.215 2.215General capital value adjustment 15.644 15.644

Total 17.859 17.859


128

Legal and statutory reserves amounting to EUR 1.927 thousand include legal reserves amounting to EUR 1.709 thousand, statutory reserves amounting to EUR 191 thousand, and reserves for own shares amounting to EUR 26 thousand. Legal reserves are formed every year in the amount of 5% from net profit for the period, remaining after covering any loss from previous periods, until legal reserves and capital reserves do not exceed the share set out in the Companies Act and the company’s Articles of Association.

In EUR thousand

Legal and statutory reserves 2008 2007

Legal reserves 1.709 1.709


Statutory reserves 191 191

Total 1.927 1.927

In 2008, the company acquired no own shares. At 31 December 2008, it reported ownership in 201 shares designated CETG. The shares are recognised at cost as a deductible item in equity.

The fair value reserve in 2008 decreased because of a drop in exchange quotations. The accumulated reserve arising from surplus from value adjustment in long-term financial investments is negative, amounting to EUR 1.995 thousand. The company formed deferred receivables from the state on that basis in the amount of EUR 419 thousand.

Capital value adjustment relates to currency differences arising from, and including financial statements of, subsidiary companies abroad in consolidated financial statements.

The minority interest capital includes shares of minority interest in the subsidiary company Cetis Print, d.o.o., Belgrade.

22. Net earnings per share

Net earnings per share are calculated by dividing basic net earnings per share by the weighted average number of shares as denominator. Diluted earnings per share are identical, as the Group holds no prefer-ential or convertible shares.

In EUR thousand

2008 2007

Net earnings in EUR 75.233 172.764

Weighted average number of ordinary shares 199.799 199.799

Basic and diluted earnings per share in EUR 0,38 0,86

23. Borrowings

Borrowings comprise long- and short-term borrowings, including the current portion of long-term borrowings.

Long-term borrowings

In EUR thousand

Type 2008 2007

Bank loans 8.770 11.841


129

Short-term borrowings

In EUR thousand

Type 2008 2007

Current portion of long-term bank loans repayable within one year 5.475 3.011

Short-term bank loans 1.900 3.451

Other short-term loans 1.240 1.190Total 8.615 7.652

Guarantees granted

The guarantees granted amount to EUR 23.172 thousand and are recorded under off-balance sheet items.

In EUR thousand

TypeTotal

repayment 2008

Interest 2008

Principal 2008

Short term loans of up to one year 4.833 150 4.683

Long-term borrowings, from 1 to 5 years 3.874 899 2.975

Long-term borrowings for the period of 5 years 1.313 1.313Total 10.020 1.049 8.971

The Group made no distinction between interest on long-term loans by maturity, and therefore the inter-est covers the period from 1 to 5 years.

24. Long-term operating liabilities

In EUR thousand

Type 2008 2007

Long-term operating liabilities arising from prepayments 4

Long-term operating liabilities arising from finance lease contracts 26 74

Total 26 78

25. Provisions

In EUR thousand

Type 2008 2007

Provisions for warranties 71 99

Provisions for legal action 29 89

Provisions for other costs 23 40

Provisions for anniversary bonuses 246 247

Provisions for retirement bonuses 701 767

Total 1.070 1.242


130

Movements in provisions

In EUR thousand

Type 31.12.2007 Made Used Reversed 31.12.2008

Provisions for warranties 99 43 71 71

Provisions for legal action 89 60 29

Provisions for other costs 40 9 26 23

Provisions for anniversary bonuses

246 35 32 3 246

Provisions for retirement bonuses

767 1 9 58 701

Total 1.241 88 41 218 1.070

The Group reviewed the provisions made, taking account of changes and decreased total provisions for the purpose of long-term deferred expenses and provisions for long-term accrued costs.

Provisions are made on the basis of contracts, legal bases and expert opinions.Provisions for retirement bonuses and anniversary bonuses.

On the basis of a calculation for each employee using the projected unit method, prepared by a certified actuary, the provisions for retirement bonuses and anniversary bonuses were reduced by EUR 66 thousand.

26. Trade and other payables

In EUR thousand

Type 2008 2007

Trade payables 5.627 6.917

Current trade payables based on prepayments 314 1.329

Payables to employees 611 644

Payables to state and other institutions 347 653

Other payables 298 427

Total 7.197 9.970

The basis are the original documents that define an event in terms of time and substance.

27. Off-balance-sheet records

In EUR thousand

Type 2008 2007

Mortgages 14.001 19.290

Other bank guarantees, liens granted and shares 7.498 13.259

Tax loss 1.547 395

Investment and other reliefs 49 9

Other 77 77

Total 23.172 33.030


131

Disclosures to Cash Flow Statement

The Cash Flow Statement was prepared under the indirect method, using data from the Balance Sheet as at 31 December 2008 and the Balance Sheet as at 31 December 2007, and data from the 2008 Income Statement, as well as the additional data required for the adjustment of inflows and outflows and for an adequate breakdown of major items.

28. Financial instruments – risk management

Risk exposure and risk management

Currency risks in the Group regarding Euro were almost entirely excluded. Almost all foreign transactions outside the EMU were also made in EUR. The highest currency risk in the Group is in Croatia, where the receivables of the company Cetis-ZG, d.o.o. are mainly denominated in domestic currency.

The Group is aware of the importance attributed to the regular monitoring and management of financial risks to which the Company is exposed in the markets, and views it as a relevant precondition for successful operations and achieving strategic goals. In 2008, interest rate risks were predominant (a general growth in interest rates, except for new debts). The analysis of these risks resulted in an estimate that the interest rate risk was higher due to the new short-term borrowings of the Company or guarantees issued. The Group expects these risks to increase in the future as a result of the operations of the parent company and its subsidiaries.

All the Group’s long-term debts are denominated in euros. Interest rates are based on market principles governing the price of money in the European banking market. Interest rate risks have not been hedged so far, as the Company assesses that the interest rate fixations offered are still above the variable rates, or that long-term changes in interest rates will allow more favourable finance costs during the whole borrowing period.

Interest rate risks increased due to the extent of loans and sudden movements and increases in interest rates. The interest rate level was assessed as still acceptable for all long-term loans, with its contractually agreed variability, and taking into account their maturity. The Group’s exposure to interest rate risks is estimated to be high.

Property risks and related risks in 2008 were systematically and analytically assigned to insurance companies.

Liquidity risks are low in the Group over the short period of time as a result of efficient asset management, adequate credit lines for cash flow control, satisfactory financial flexibility and good access to necessary financial resources, whereby the Group takes into consideration the circumstances in the financial environment and financial markets.


132

Financial instruments – credit risk

The highest credit risk exposure at the reporting date was as follows:

Notes

Book value

In EUR thousand 2008 2007

Available-for-sale financial assets 11 13.443 14.305

Financial assets at fair value 17 2.156

Loans granted 12, 18 1.408 1.611

Current and non-current trade receivables 13, 19 6.617 8.616

Cash and cash equivalents 20 1.042 1.003

Total 22.510 27.692

The highest credit risk exposure for borrowings at the reporting date by geographical

Book value


Domestic 840 398

Other European countries 327

Other regions – outside EU 568 886

Total 1.408 1.611

Credit risk exposure

In EUR thousandNotes

Book value

2008 2007

Receivables 6.617 8.616

Total 6.617 8.616

The highest credit risk exposure for trade receivables at the reporting date by geographical region was as follows:

In EUR thousand Book value

2008 2007

Domestic 5.194 4.861

Euro zone countries 862 815

Other European countries 260 1.337

Other regions – Africa 301 1.603

Total 6.617 8.616


133

Impairment losses

Trade receivables at the reporting date:

Gross value Impairment Gross value Impairment

In EUR thousand 2008 2008 2007 2007

Non-past-due 5.289 7.671

Past due 0-30 days 759 4 566

Past due 31-120 days 442 15 508 64

Past due 121-365 days 243 151 350 244

More than one year 1.166 1.112 1.036 1.207

Total 7.899 1.282 10.131 1.515

Movements in value adjustments due to impairment of trade receivables in the period


Balance 1 January 1.514 952

New value adjustments 74 648

Written-off value adjustments -55 -49

Paid written-off value adjustments -251 -36

Balance 31 December 1.282 1.515

Currency risk

In EUR thousandEUR HRK USD GBP CHF RSD DKK EUR HRK USD GBP CHF DKK

31.12.2008 31.12.2007

Trade receivables 5.112 8.991 3.247 8.165 7.146

Accounts payable -3.978 -4.450 -5 -33 892 -1 -6.950 -3.351 -121 -26 -111 -12Secured bank loans

-13.086 -4.752

Balance sheet gross exposure -11.952 4.541 -5 -33 4.139 -1 -3.537 3.795 -121 -26 -111 -12


134

Sensitivity analysisA 10 per cent increase in the value of the euro against the HRK, USD, GBP, CHF and DKK at 31 December would result in a decrease in equity and profit or loss by EUR 58 thousand. This analysis assumes that all other variables, interest rates in particular, remain constant.

31.12.2008 Book value Contractual cash flow

Up to 6 months

6 to 12 months

1 to 2 years

2 to 5 years

Over 5 years

In EUR thousand Transaction account overdraftSecured bank loans 13.086 -14.360 -4.276 -1.827 -3.569 -4.688

Other loans 2.400 -2.551 -351 -2.200Accounts payable and other liabilities

7.012 -7.012 -7.012

Total 22.498 -23.923 -11.639 -4.027 -3.569 -4.688

3-month euribor 31.12.2008 4,684

6-month euribor 31.12.2008 4,707

31.12.2007 Book value Contractual cash flow

Up to 6 months

6 to 12 months

1 to 2 years

2 to 5 years

Over 5 years

In EUR thousandTransaction account overdraft

52 -54 -54

Secured bank loans 17.089 -18.890 -5.353 -1.786 -3.446 -6.955 -1.350

Other loans 1.189 -1.235 -301 -934Accounts payable and other liabilities

10.047 -10.047 -10.023 -8 -16

Total 28.377 -30.226 -15.731 -2.728 -3.446 -6.971 -1.350

3-month euribor 31.12.2007 4,684

6-month euribor 31.12.2007 4,707

Interest rate risk

At the reporting date, loan contracts concluded by the Group were with both fixed and variable interest rates.

Book value

2008 2007

In EUR thousand

Instruments with fixed interest rate

Financial assets 2.279 1.223


Difference -892 -3.057

Instruments with variable interest rate

Financial assets 718


Difference -14.215 -14.494


135

Sensitivity analysis of fair value for instruments with fixed interest rate

A change in interest rates by one percentage point at the reporting date would result in an increase or decrease of the equity by EUR 41 thousand.

Sensitivity analysis of cash flow for instruments with variable interest rate

A change in interest rates by one percentage point at the reporting date would result in an increase (de-crease) of the equity and profit or loss by EUR 35 thousand.

29. Fair value

Overview of fair value and book value of assets and liabilities

In EUR thousandBook value 31.12.2008


Book value 31.12.2007


Available-for-sale investments 13.443 13.443 14.305 14.305

Loans 334 334 1.249 1.249

Non-current trade receivables 878 878

Non-current trade receivables 6.617 6.617 7.738 7.738Current investments at fair value through profit and loss

2.156 2.156

Short-term loans 1.074 1.074 362 362

Cash and cash equivalents 1.042 1.042 1.003 1.003

Long-term borrowings -8.770 -8.770 -11.841 -11.841

Short-term borrowings -8.615 -8.615 -7.652 -7.652

Trade and other payables -7.197 -7.197 -9.970 -9.970

Total -2.072 -2.072 -1.771 -1.771

Available-for-sale investments are measured at fair value and depend on recognition of the investment at the rate applicable on 31 December 2008.

Loans and borrowings are measured at amortised cost calculated using the method of effective interest rate that does not differ from the contractual interest rate. Accordingly, the contractual interest rate is used in the calculations.

In trade and other receivables, the impairment to fair value is taken into account in view of when they are expected to be collected. Receivables are not discounted, due to their short-term nature.

The same applies to trade and other payables that are not discounted owing to their short-term nature.

Testing financial investments in terms of possible impairment

The Group performed no impairment of financial investments. Upon acquiring an investment in mutual funds and other investment companies, the Group classifies them among long-term investments if the intention is to own such investment for more than one year. If such investment is listed on the stock ex-change, it is entered in the books at fair value; if the investment is not listed, it is valued at cost. When an investment in mutual funds and other investment companies is valued at cost, it is tested five years from the date of acquisition to determine whether the investment should be impaired.


136 Such investment is usually impaired if the purchase value in a period of five successive years exceeds the realisable value on the balance sheet cut-off date. When valued at fair value through capital, it is checked five years from the date of acquiring such investment for the probability that such investments need to be impaired. An investment is usually impaired when its fair value in five successive years is continuously lower than the investment purchase value. Impairment is performed in compliance with IAS 39.

For all other financial investments valued at fair value through capital, verification of possible impairment was performed on the balance sheet date, comparing the percentage of decrease in fair value of a financial investment in the period from the date of its recognition up to the balance sheet cut-off date, as well as relative change in the Slovenian Share Index (SBI 20). The amount of financial investment required after checking for possible impairment represents an insignificant item in the company.

For financial investments valued at cost, checking for possible impairment was performed on the balance sheet cut-off date. Checking for possible impairment of financial investments valued at cost was performed by comparing the investment book value from the most recent known statements to the investment purchase value. Insofar as the discrepancy from the book value was high, the review was performed by assessing the current value of future benefits. No impairment was required.

30. Related party transactions

Relationships between related companies

Transactions between the Group and related parties were based on contracts of sale, whereby market prices of products and services were used.

Disclosures by groups of persons: members of the Management Board, Supervisory Board, and staff employed under individual employment contracts.

Total remunerations received by groups of persons for the performance of functions or duties in the financial year:

- Management Board EUR 267 thousand,

- Other staff employed under individual employment contracts EUR 981 thousand,

- Supervisory Board EUR 13 thousand.

Loan repayments under earmarked loans granted by the Group to persons from these groups amounted to EUR 0,5 thousand in 2008.

Post balance sheet events

Major post balance sheet events are described in the introduction section of the Business Report.

Simona Potočnik, MSc

Cetis d.d.

Documents

Transcript of Cetis d.d.